Why Payment Protection Insurance Hurts The Banking Industry

As a society, we have come to the understanding of a few things in the financial world that are just true. We believe that banks are there to provide safe harbor for our money, and to even help us grow it. We believe that insurance provides great peace of mind that we can turn to when times get rough. However, what happens when we feel that the banking industry has lied to us through some of the products and services that were sold? It’s very tempting to say that you’re going to be able to automatically trust in the bank again, but we know from experience that people have a hard time trusting a company when their initial confidences were broken.

That’s the problem facing the banking industry now that the truth about payment protection insurance is back. If you are not careful, you could find yourself facing a lot of extra money that went out the door. Analysts have found that up to half of a loan’s total value could be trapped in these PPI premiums.

This is a type of insurance that actually has a pretty high level of rejection when it comes to claims. You might have bought into the PPI policy, or it might have been forced upon you as a condition of getting the loan. This is something that is very wrong, and the banking industry has to wear the shame of knowing that their representatives sold thousands upon thousands of bad policies to people that trusted them.

It’s now time to fight back, even though you might still be in shock. What could you do with those extra payments? Quite a lot, and that’s the problem — you are owed compensation. Not just the raw figure — but interest that should be paid on the money. You essentially had a forced savings account, and that’s not a good thing at all. So you will be entitled to getting interest on the money that was essentially stolen from you.

If you know that you have been mis-sold PPI, now is definitely the time to find legal representation.

It hurts the banking industry because once trust is lost; it’s hard to get back. The industry as a whole is going to have to make sure that they focus on the bigger picture here, and that’s going to be regaining the trust of their customer — not an easy road at all!

Loans Jargon Explained

When you’re debating loan options, such as mortgage, auto or personal loan offers, you may have come across some terms you didn’t quite understand. Loan jargon, common terms used in the finance business, may be more important than you think. Common industry terms reflect extra fees, penalties and some crucial parts of your loan agreement.

Annual Percentage Rate (APR)

The APR is clearly displayed on most loan options and is an important figure for you to note. The annual percentage rate represents how much the loan will cost your over 12 months. The APR reflects in interest rate, your repayment schedule and any other fees the lender is adding. The higher the APR, the more the loan is costing you over its term.

Eligibility Criteria

The eligibility criteria is all the standards you need to meet to get approved for the lender’s product. Common criteria includes a minimum loan amount, a minimum credit score and a minimum level of income.

If you don’t want to take out the minimum loan amount or have a lower credit score or less income than the lender requires, you won’t be approved for the loan. You can save yourself time and an unnecessary check on your credit report if you determine you don’t meet the eligibility criteria before applying.

Early Repayment Fees

An early repayment fee often sneaks up on borrowers. If you pay off the loan before the end of its term, you’re charged a fee. The fee varies by lender. Some loan options include an early repayment fee, while others do not. The prepayment fee may be a percentage of the total amount you borrowed and usually drops over time.

Collection Costs

Collection costs are the extra fees a lender will charge if you fail to make your repayments in full or on time. The charges reflect what the lender expects to spend trying to collect past due payments from you. Collection costs may add up quickly and made it more difficult for you to pay the loan back. Collection costs should be spelled out on your loan agreement, so check the costs before you sign.

Payment Protection Insurance

Payment protection insurance, or PPI, is an insurance policy offer to borrowers. If the borrower experiences an event that qualifies under the PPI policy, such as a disability that prevents employment, the policy covers the loan repayments.

While many lenders offer PPI, it’s not required for credit approval. If a lender is requiring PPI, report the lender to your local financial authority.

Understanding loan jargon when you’re exploring your loan options may help you avoid making a costly mistake or getting a loan with poor terms. Unexpected loan surprises, such as an early repayment fee, can upset your finances if you’re not prepared.