Finding cheap loan protection insurance is no mean feat today. Recent Bank of England interest rate increases and the ongoing investigation by the Financial Services Authority into payment protection insurance (PPI) have resulted in high street banks increasing available loan rates. As a direct result of the loan rate rises, loan cover has increased in price, thus making cheap loan protection insurance virtually extinct.
The Bank of England base rate is at its highest level since March 2001 and at the time of writing, (August 2007) currently stands at 5.75%. Whilst this may be good news for savers, it represents decidedly bad news for borrowers. The sub-6% loan rate was all but gone before July 2007, when the interest rate increased, as a result of a dip in high street bank and lender profits, a knock-on effect of the Financial Services Authority investigation into payment protection insurance.
Many lenders had been accused of ripping off consumers by offering poor value products. However, the loan rate increase has since justified even more expensive cover, thus eliminating cheap loan protection insurance for the majority.
However, that is not to say that cheap loan protection insurance is not still available. It is still out there but consumers do have to take the time to shop around in order to find it. Standalone payment protection providers are now providing high street banks and lenders with competition and that may actually serve to reduce costs for the consumer in the future.
Cheap loan protection insurance, when taken out in the form of a standalone policy, can save the consumer a lot of money. Not only is the premium less, but also monthly premium payments make it more affordable over the course of a loan and the independent nature of the cheap loan protection insurance actually protects it from the interest rate that is routinely added to it if the total cost of protection is added onto the loan repayment. In any terms, it makes sense to look at all of the options before settling for a specific provider!