There is no unambiguous answer to the profitability of loan security. Some may sleep better during the night with loan security, but some may find it merely a means of bank financing. Whichever is the case depends on the situation. Especially about the borrower and the security offered.
If the terms of the indemnity for loan security are limited and the cost of the security is high in relation to its contents, then clearly it is a fund. In addition, the money that is paid because of that “if something happens” is, of course, out of use, such as loan repayments or buffer savings.
On the other hand, if you feel that the terms and conditions of the loan security are comprehensive, fit your budget and you want peace of mind, loan security can be the solution. In any case, it is worth weighing up the issue of loan security.
Loan Coverage = A type of borrower’s insurance that is taken out against a declining ability to pay. Such situations may include, for example, unemployment or illness. This repayment protection appears as a monthly or annual payment in addition to the cost and interest on the loan.
Consider loan security in these situations:
- You are applying for a big loan.
- You are solely responsible for the refund.
- Only one of the borrowers has regular income.
- You want security in difficult times.
- You have received a competitive offer.
- You can afford it.
What should be taken into account in loan security?
- My health. In order to obtain insurance, the applicant must be in good health. For example, even a diabetic or a person with regular cholesterol or antihypertensive cancer may not be able to obtain loan security.
- Work. You must have been working uninterrupted for a specified period in order to be covered. In addition, you will not be able to obtain loan security if you are already aware of layoffs or unemployment.
- Difficult to compete. It is difficult to compete with loan security insurance alone, as in most cases Payment Guarantee is tied to the loan itself. However, banks, financial institutions and insurance companies may have different types of loan security packages.
- Compare the entities. Don’t just go for the price, remember the content as well.
- Read the fine print. The contents of the loan security are very detailed and do not always replace everything. For example, any kind of unemployment is not covered by a loan security: by refusing to provide replacement work by the employer or agreeing to a resignation package, you are playing out to get a loan.
- Beware of duplication of insurance. For example, existing life insurance or accident insurance may already cover some.
- Consider the total cost of the loan. Remember to include your loan security costs in the total cost of the loan. Is the price going too high?
- Check the expiration date. In some cases, for example, the loan security may only be valid for the first five years.
- Make sure you can be dismissed. Some contracts bind their customers to make termination difficult. So check this in advance.