Unsuitable PPI could ‘increase personal loan costs’

Borrowers looking to take out a personal loan should choose a monthly payment protection insurance (PPI) plan instead of a single premium policy, an industry expert has suggested.

According to PPI provider Paymentcare.co.uk, an increasing number of consumers are paying off their secured loans ahead of schedule.

However, when loan repayments are completed early, those who have taken out a single premium PPI plan could find they still have to meet the costs of their insurance policy.

Managing director Shane Craig said: "If they take a single premium PPI policy to cover a five-year loan but pay it off or re-finance after a couple of years, they will have paid to insure a loan that no longer exists.

"Monthly paid loan PPI policies are the only way of ensuring that borrowers are treated fairly."

He added that with debt levels currently at record highs, "PPI is a very valuable back-stop to prevent people from sliding further into difficulty".

Earlier this month, the Resolution Foundation claimed that the creation of a generic financial advice service could help Britons develop a better understanding of secured personal loans, credit cards and mortgages.

Interfinancial providing you with breaking personal loans news.