What is loan insurance? How can you ensure your cash loan? How much does loan insurance cost? Is it worth insuring the loan? Is loan insurance compulsory? Cancellation of loan insurance – how to do it? When is it worth insuring a loan?
Are online loans and payday loans safe? Each loan that we decide on involves some risk. Depending on the repayment period, this risk is smaller or larger. Is it worth taking out a loan when taking out a loan?
What is loan insurance?
More and more banks and loan companies require loan insurance. Some of them decide to buy it, they leave it to the client, in the case of others it is forced.
Loan insurance is insurance against its repayment in the event that the borrower, as a result of illness, accident or death, cannot settle the contract. An insured loan is more expensive than an offer without insurance, as the insurance increases the monthly repayments as well as its overall cost.
By insuring a loan, we become a solvent customer for a non-bank institution. Therefore, in the case of customers with low creditworthiness, purchasing insurance may help to improve the terms of the loan.
How can you insure your cash loan?
Cash loan insurance can be credited, but it can also be included in the cost of the loan. In the case of credit, its sum reduces the amount of loan received, but when including insurance in the cost of the loan, it increases their amount. From the client’s point of view, the most advantageous is the installment insurance fee together with the loan repayment.
It happens that the lender allows the client to choose the insurer himself. Then, in addition to the price, it is also worth considering the GTC, i.e. general insurance conditions. It is best that the situations in which the insurance is paid out should be as many as possible.
How much does loan insurance cost?
Probably now you are wondering what the loan insurance is. The insurance amount is part of the non-interest loan costs that increase the APRC. According to the provisions of the Anti-Lich Act, their amount may not exceed 25 percent. the total loan amount and 30% this amount on an annual basis.
The insurance fee is not fixed, it is influenced by several factors, including:
- loan amount,
- repayment date,
- borrower’s age,
- scope of situations to be secured.
The insurance premium can be charged once on the loan amount or it can be spread into monthly installments, thus increasing their amount. The cost of insurance includes the APRC.
Is it worth insuring the loan?
If loan insurance is compulsory, there is no need to think about the pros and cons of such a solution. Otherwise, it is worth considering what the loan insurance gives you and whether it pays to get it.
Is loan insurance compulsory?
Some banks even force you to buy insurance, in case of refusal the decision to grant a loan is negative. Meanwhile, the answer to the question “is insurance mandatory” is – no.
Banks bypass the law and require insurance, while the contract is structured in such a way that taking a loan without insurance is completely unprofitable. The situation is different in the case of loan companies, where the decision to buy insurance is usually voluntary.
Cancellation of loan insurance – how to do it?
If the loan company or bank treats insurance as compulsory, you can opt-out only if you show proof that you already have similar insurance. Even if the borrower takes out insurance, he may withdraw from it during the term of the contract.
Unfortunately, giving up insurance is not always worth it. It may turn out that for the resignation from insurance the borrower will be charged with a contractual penalty, interest will increase in this respect, and in extreme cases, the loan agreement will be terminated. Cancellation is profitable only with early repayment of the loan or withdrawal from the contract – allows you to bypass all penalties.
When is it worth insuring a loan?
In fact, you can ensure any situation that creates a risk of loan repayment. The most common insurance is:
- death (so that heirs do not have to pay the borrower’s liabilities),
- job loss (it cannot be the fault of the borrower),
- inability to work,
- consequences of accidents.