When you take out a loan, you will take most out for a substantial amount of time. This is especially the case for home loans. You never know what will happen in the future, so you need to make sure that your loan repayments are protected. PPI is available but not beneficial for everyone. Here are some options to protect your loan repayments without having to opt for PPI.
Protect Your Income Instead
Rather than looking at ways to protect the repayments on your finance, take a look at ways to protect your income. Income protection insurance is available from the majority of banks, both short term and long term. They are designed to make sure that you can afford the repayment on your home loan or rent should you find yourself unable to work and are beneficial even for those who are self-employed.
Income protection helps if you are made redundant, if you have a long term illness or if you suffer an injury that prevents you from working. You will usually gain a percentage of your income to help make the most important payments. Long term protection will help to cover all the way up to retirement.
Opt for a Lower Payment
Just because you can currently afford a larger amount each month doesn’t mean you will be able to in the future. When you have the choice, opting for a longer term may be more beneficial to reduce your monthly repayments, especially in the case of a mortgage. If you lose your job, you will find it easier to scrape £100 together instead of £200.
While you are paying the lower amounts, put the extra that you would have paid into a savings account. This will offer the buffer if you do lose your job to pay your loan repayments and other outgoings. You will need to pay more in interest but that is often worth it for peace of mind.
Talk to the Lender When There Is a Problem
As soon as you know there will be a problem, contact your lender. The lender will want to make sure you stay in your home, keep your car or protect your credit rating and they will be more understanding if you are instantly upfront about the situation. Many lenders will find an option for you, whether it is a remortgage at a lower rate or to offer a temporary repayment holiday. If you leave it until you face foreclosure, the lender will not want to help you as they will have already suffered their own costs.
Payment protection insurance can be beneficial but it is not the only way to protect your loan repayments. Income protection is an option or you could look at extending the term to be able to save money for the future. Too many PPI policies have been mis-sold and you may be a victim.