The 42.5% interest charge on payment protection insurance
- 19TH MAY 2007
While buying a second hand car can work out quite well, for some it can turn into a nightmare. The “This is Money” website recently highlighted this when one woman’s bad experience was brought to light.
This unfortunate young lady bought a second hand car for what seemed to be a bargain; however the £7,000 bargain turned into £21,500 just minutes before taking the car.
How had this happened? Well she had fallen victim to a massive interest rate for payment protection insurance (PPI) on the “bargain” car. The credit agreement which she has signed added a massive 42.5% interest rate.
In short the payment protection insurance she was taking out cost more than the car itself. Very often deals such as this are hidden in the agreement and only come to light after signing.
Unfortunately when the car was written off, this left the poor young woman owning thousands of pounds in debt, however with “This is Money” backing the lenders are no longer pursuing her for repayment.
The car she bought was worth £7,080. But, with added on interest rates and other charges this eventually ended up costing her a whopping £21,540.
Consumer champion Simon Burgess from independent payment protection insurance specialists British Insurance commented on the story saying that the charge was “ludicrous” and this case was typical of the sort of horror stories he had heard regarding the overpricing of payment protection insurance.
“How companies can justify this sort of charge is beyond me,” he said. “Luckily this lady’s case was picked up in time by the media so that she did not suffer financially. But how many more other people are there out there being ripped off?”
Simon urges anyone taking out a loan to shop around for their payment protection insurance. British Insurance offer loan payment protection insurance cover that costs up to 80% less than traditional lenders and banks.
