Loans - PPPI, The Low-Down

If you have a mortgage, personal loan or credit card then chances are you have a Personal Protection Policy or PPI, or if you don't then it's even more likely that you were offered one.

The reason that these factors are so likely is because after car and household insurance, PPI is the 3rd largest insurance product in the UK.

However, even though PPI is so commonplace this doesn't mean it is popular, the current stance on PPI is actually quite the opposite, with many consumers being urged to question their PPI polices.

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The high-pressure tactics used by those selling PPI has resulted in the Office of Fair Trading (OFT) and the Financial Services Authority (FSA) to carry out investigations into companies selling PPI.

When sold, PPI is said to offer monthly benefits, such as paying a certain amount of your required repayments, should you have an accident, fall ill or become unemployed - although only around 20% of claims are said to be successful.

The reason PPI is so hard sold is based on how profitable it proves for the companies selling it, currently this profit is at an estimated £5 billion per year. In fact, the amount of profit made on the products being insured is dwarfed by the money made from PPI.

Although the PPI you are offered may seem a relatively small price to pay for the peace of mind you are being offered, it's important to understand that this all adds up. You should therefore work out how much the PPI will cost you for the length of your loan as; chances are it will easily be in the thousands!

Of course there are situations when PPI has proved very useful and borrowers simply would not have been able to afford their loans if they had not taken it out; as with any financial product, it's important to browse and research the market.

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