Companies providing payday loans are divided into those that offer insurance and those that do not have this insurance on offer. What does insurance give us, is it worth taking loans with insurance and who makes money from it?
The insurance we get with loans is life insurance. This means that in the event of death, the Insurance Company will pay our debt and the family will not inherit this obligation. Of course, the payday loan company is entitled to receive money from insurance.
It is beneficial for her because she reduces the risk of the loan due to the fact that in the event of the borrower’s death, she does not have to claim her family and gets money from the insurance company.
Who benefits from loan insurance?
Of course, the company that makes the loan earns insurance, it gets a commission on insurance in which it hides its income, so instead of a commission or a preparation fee, the customer pays for insurance.
Is it wrong? We think not because, colloquially speaking – if the company that gives us payday loans is supposed to get money anyway, at least let’s get something out of it. Unlike the preparatory or administrative fee, insurance can be useful and also beneficial for the client. Other fees we have to pay for a quick money loan don’t give you that chance.
Loan insurance – nothing new
Compulsory insurance when borrowing money is not new to the loan industry. The so-called bancassurance – that is, the cooperation of insurers with banks, has been going on for years, with virtually every cash loan we have to take out life insurance or unemployment insurance. For mortgage loans, real estate or bridging insurance is the rule used between the loan payment period and the entry in the land and mortgage register. Insurance, of course, is nothing more than a combination of the bank’s collateral from the assignment of insurance and an additional commission that is hidden in the insurance.
The fact that loan companies hide their commissions in insurance does not mean that these fees are hidden from us, contrary to popular belief, the cost of insurance is included and increases the APRC, like any other fee used by a loan company
What is the borrower’s insurance process like?
It is enough if at the moment of taking payday pay he agrees to join the insurance, with payday payouts online, it means that one checkbox is unchecked, i.e. the square next to the consent formula. Each loan company should also have insurance conditions available on its website. This is a document, drawn up by an insurance company, which lists the rights, obligations of the insured and all insurance instructions. The terms of insurance also include so-called exclusions – these are situations in which the insurance company does not pay benefits. This is an important part of this document because, too wide a range of exemptions, can cause the insurance to be empty, that is, there will be no chance of getting money from it.
The customer, when taking out a loan, will not get a policy because the policyholder is the lending company and he gets a certificate of insurance for his clients.
How to withdraw from insurance?
Sometimes, customers want to withdraw from insurance, thinking that in this way they will reduce the cost of their loan. They are half right here because according to the Insurance Act, every insured has the right to withdraw from the insurance contract and if the premium was paid, the insurance company should pay the premium due to the unused period. All this is correct, but, as we wrote earlier, loan companies hide their insurance margin, which is why they will not give up so easily.
Every online payday loan company with insurance has a contract stipulated that in the event of a customer resigning from insurance, either he must automatically repay the loan or the interest rate increases, or he has to reposition several guarantors, it boils down to one thing: or instead insurance, we have to pay a normal commission, or we have to pay back the loan, i.e. de facto we want to cancel it.
Which payday loans have compulsory insurance and which are not?
In summary, the intentions of loan companies that reap a large proportion of their profits in insurance are obvious, but some companies do not hide it at all and apply lethal fees. Therefore, our advice is not to be afraid of insurance, let’s just compare what amount we have to pay back to a loan company.
If the amount is comparable between the company offering the insurance and the company that gives the loan itself, choose the one with insurance, because then we get collateral in the price.