Defaqto is warning that consumers need to seriously check what they are being sold by lenders offering payment protection insurance.
Following yesterday’s signalling by the Office of Fair Trading of its intention to refer the UK PPI market to the Competition Commission, Defaqto says it once again highlights the need for customers to check what they are being sold.
Associate director Brian Brown says with estimates that customers are overspending by around £1bn on PPI policy premiums, people need to think very carefully when buying their insurance.
Defaqto published a report earlier this year, “Payment Protection Insurance in the UK“, which highlighted the massive differences in price and cover that are offered by apparently similar payment protection products.
The research company’s latest figures show that on a £5,000 personal loan over four years the extra cost of PPI can vary between £18.10 and £46.19 a month, for loans with exactly the same headline APR – a difference over the four years of almost £1,430.
Brown says: “PPI does have valuable benefits for the right claimant, but customers should think carefully before ‘ticking the box’ when applying for a loan or credit card. They need to be sure that they will be eligible to claim and that they understand just how much more the insurance adds to the cost of credit.
“When applying for a personal loan customers should shop around and check the cost of loan AND payment protection insurance rather than looking at the headline APR. Choosing the wrong loan could prove a very costly mistake.”