The end of cheap loans predicted
- 5TH JUNE 2007
Six months ago it was common to see sub 6% loans being brandished around, with loan companies and lenders have got the boxing gloves on in the constant battle for the consumer’s attention. However, within three months and by March 2007 only one 6% sub provider still offered their original rate.
While the loan rates brought the customers in, the banks simply weren’t making enough profits. Instead they made their profits through selling payment protection insurance (PPI), which is commonly sold alongside loans in order to protect the monthly repayments. Payment protection insurance will cover the cost of monthly repayments of the debt, typically for up to a year, should the borrower find themselves out of work due to illness, accident or involuntary unemployment.
With the investigations by the Financial Services Authority and the Office of Fair Trading and the in-depth review by the Competition Commission into the widespread mis-selling of policies, heavy restrictions are set to be imposed on the selling of policies and as such the banks and lenders stand to lose a huge amount in profits.
To make up for the shortfall in profits from payment protection insurance, it is highly likely that we will see the end of cheap rates on loans as they will rapidly increase even more than they have done in the last few months.
It is ironic that if the interest rates on loans increase then the need for payment protection insurance will be greater. However there is some good news, British Insurance are standalone payment protection providers who can help you to make savings of up to 80% on your loan payment protection policy while offering a quality product.
There may be a wrangle over payment protection insurance and its future unclear but it is without a doubt a worthwhile investment for anyone with any kind of debt.
