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Bank Loan Insurance Charges

When considering the importance of approval for a bank loan, it is easy to see why many subprime borrowers settle for less than ideal terms and conditions. As such, a lot of unscrupulous financial institutions and individual lenders take advantage of less fortunate borrowers by charging them for payment protection insurance (PPI) unnecessarily. Payment protection insurance is a type of policy that is supposed to provide coverage in the event that the policyholder/borrower is unable to make repayments on their bank loan. Sadly, the majority of payment protection claims that are filed against PPI policies are not honored, as the borrowers are deemed ineligible.

Why Do Lenders Sell PPI to Ineligible Borrowers?

There are various reasons why a lender would want to sell a PPI policy to a borrower unnecessarily, with all of the causes ultimately equating to higher profits. Some salespeople receive a commission for every PPI policy they sell, and therefore this encouraged some to use underhanded sales tactics. In addition, lenders also charge interest based on the total amount due in monthly repayments, and since PPI policy adds to the overall value of the loan, the lender may be able to get away with charging interest on bank loan insurance charges. When a financial institution or lender knowingly offers or enrolls a borrower for a PPI policy even though they are ineligible for coverage this is known as mis-selling.

How Do Lenders Mis-Sell PPI?

While some unscrupulous salespeople did enroll an individual for PPI without any consent at all, many will try to convince the borrower that it is in their best interest to apply for bank loan insurance, in order to eliminate the possibility of being unable to make repayments due to unemployment or unforeseen circumstances. Lenders may also deceive a borrower into believing that they will be more likely to gain approval for the loan if they purchase "bank loan insurance", which is a friendlier term for payment protection insurance. In fact, PPI is referred to by many names, including but not limited to payment protection, protection insurance, and loan insurance. By using underhanded tactics and synonyms for PPI many lenders mis-sell hundreds of policies per year without any repercussions.

How to Reclaim Bank Loan Insurance Charges

Fortunately, authorities like the FSA (Financial Services Authority) in the United Kingdom are beginning to crack down on dishonest lenders that mis-sell PPI, and tens of thousands of borrowers reclaimed bank loan insurance charges last year alone. It should be noted that PPI claims companies help you reclaim the funds spent on unnecessary bank loan insurance charges from  lenders, not the payment protection insurance company, which could be considered an innocent third party. Lenders that mis-sell PPI violate the trust of not only their borrowers but also the insurance companies that they deal with directly, and are therefore required to compensate misled borrowers.

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