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Loan Protection Agreements

Loan insurance, also known as payment protection insurance (PPI), is often pushed by lenders who are motivated to earn higher profits through additional interest and commissions paid by insurance companies. Each time loan protection insurance policies are sold the lender receives a commission, and the total amount of the policy premium is added to the loan, thereby increasing monthly repayments as well. In fact, the Financial Ombudsman Service found that a significant number of lenders generated the majority of their profit via commissions earned through the sale of PPI policies. Many loan protection agreements using vague terminology to describe the payment protection insurance policy and some lenders will fail to mention the policy completely, stating only that the loan is "secured".

Yearly Statistics for Loan Protection Agreements

It is estimated that anywhere from 70,000 to 100,000 UK borrowers will attempt to recover payment protection insurance payments during the next 12 to 24 months. Almost 30% of the claims sent to the Financial Ombudsman Service (FOS) each year are directly related to PPI policies, while about two thirds of the complaints examined pertain to various types of lending products. While 85% of PPI policyholders are denied repayment assistance, studies conducted by the financial ombudsman service (FOS) have revealed that a single PPI policy premium account for as much as 56% of an unsecured personal loan. Unfortunately, several million PPI policies will be mis-sold this year, and many more consumers will be deceived into spending thousands of pounds on unnecessary coverage.

Disputing Loan Protection Agreements

Reclaiming PPI is less of a challenge now that a handful of financial authorities have published studies about the improper sale of PPI policies in the UK. Any time a lender fails to describe a policy terms and conditions, or persuade the borrower into purchasing a policy unnecessarily there is a good chance that all of the funds spent on PPI can be recovered. Policies that were mis-sold and financed by the financial institution in the form of a single premium are usually refunded with less scrutiny because of the obvious motivation for profit. Analysis conducted by a major financial authority revealed that just 5% of the PPI policies reviewed were actually sold in accordance with FSA guidelines, with the other 95% being mis-sold because of unethical salesmanship or misleading information.

Chances of Recovering Funds Spent Due to Loan Protection Agreements

While it may be intimidating to file a claim against a major bank, is actually the responsibility of the lender to prove that they sold the policy in accordance with FSA guidelines, regardless of the financial institution's previous reputation. This is especially true now that investigations directed by the Financial Services Authority have demonstrated that the majority of PPI policies are mis-sold, giving many borrowers hold that there Loan insurance claims will be honoured this year.

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