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Loan Protection Premium

When trying to understand mis sold payment protection, it isn't always easy to figure out how much you have been paying in premiums. Perhaps this is because different types of cover are charged uniquely, but also because the cost varies so widely from 13% to 56% (or more) of the cost of the actual amount being borrowed. Sometimes, in extreme cases, lenders have charged more than 60% the amount they loaned for payment protection insurance. It may sound absurd but it is all too true. When trying to determine how much your loan protection premium costs you will need to understand the three ways in which they can be priced.

Onetime Premium at Loan Origination

Most of the time a loan protection premium attached to a loan such as a mortgage loan or automobile loan will be assessed as a onetime premium when the loan is closed. Without going into the matter of whether or not the borrower knew payment protection was being added to the loan, the fact is that there is a huge onetime premium which will be amortised over the term of the loan. This onetime loan protection premium can be frightfully misleading however as it will be charged over the entire life of the loan but the payment protection may stop at some point long before the loan comes to term. Since the cost of a onetime premium is so visibly noticeable because of its size, most people recognize the enormity of the situation and immediately file a mis sold PPI claim.

Monthly Premiums on Revolving Lines of Credit

Another type of payment protection that is commonly mis sold is PPI on credit cards. Unlike onetime premiums, credit card PPI is always assessed as a predetermined percentage of the outstanding balance carried forward from the previous month. Therefore, if the credit card holder pays off most or all of the outstanding balance the loan protection premium will be significantly smaller than it would be if that consumer carried a £10k balance from month to month. Don't be deceived when you hear that you are only paying .75 (three-fourths) of one percent because in the end it will be closer to an 8% or 9% APR.

Fixed Rate Loan Protection Premium

This type of loan protection premium operates a bit differently and may be attached to such things as overdraft protection. Sometimes it is a fixed rate premium that will always be the same whenever it is called up to cover insufficient funds. Although fixed rate premiums are common with overdraft protection insurance, there may be times when the premium is based on the amount of overdraft protection provided. Before assuming that you have a fixed rate premium, talk to your lender at length to understand how premiums are assessed.

The reason why it is so important to understand how a loan protection premium works when filing mis sold PPI is because you will need to estimate how much money you should be claiming. This is one of the services Belmont Thornton can provide when representing you. Talk to the claims team to about your claim and by all means use the online claim estimator to see what you should have coming in a PPI refund. To get on the PPI claim fast track call 0207 471 2000 to have your claim pack in the mail within just 24 hours. The sooner you file, the sooner you can have that loan protection premium refunded to you.


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