Debt Consolidation Loan

Watch out for massive payment protection charges on loans

If you are taking out a personal loan, look carefully at the costs because you could be massively overcharged for payment protection insurance without even realising you are paying for the cover.

Consumers are, quite rightly, taking out personal loans because they are cheaper than credit card borrowing. There are plenty of offers around at under 6.5% - not much more expensive than secured lending on a mortgage.

But as demand for loans soars, specialist broker Burgesses claims that major lenders are breaching FSA rules by employing misleading sales techniques in order to persuade borrowers to sign-up for expensive, loan protection cover.

Sales of loan protection policies are running at a rate of over 1,000 an hour, with lenders raking in an astonishing £22 million a day in commissions or £8 billion a year, according to Burgesses' research. This may, however, be an overestimate, as commissions are not disclosed.

And the lenders rely on consumer’s ignorance and apathy to sell this expensive insurance. Burgesses carried out some mystery shopping, posing as potential borrowers. Almost all lenders automatically included insurance cover in the loan quote when first contacted by Burgesses staff. Even more worrying, none of the lenders bothered to check whether the applicant had pre-existing medical conditions, which would almost certainly invalidate the cover.

Source : CityWire.co.uk - London,England,UK