- Sometimes, lenders might sell their loan products with payday loan insurance.
- Payday loan insurance is insurance that can protect you from missed credit payments.
- The borrower isn’t obligated to get the coverage. If your lending provider pressures you, consider it a warning sign.
What Is Credit Insurance?
Payday loan insurance is an optional coverage that protects the borrower if they become unable to repay their loan within the term. An example of this scenario is if you get injured, and you’re unable to work. Lenders often offer credit insurance to their consumers along with loan funds. This way, there’s no impact on your credit report, and the lender still gets their money.
Where Can I Find Payday Loan Insurance?
Usually, borrowers get loan coverage directly from their lenders when they get payday loans. Once again, we must mention that the lending provider can suggest or promote the insurance to the borrower. However, they can’t make you purchase it.
Why Should I Get Payday Loan Insurance?
Before you decide to purchase credit insurance from a payday lender, there are several factors you must consider. These include the insurance policy itself, the requirements, and any extra charges you might need to cover.
After looking over all the information, you’ll be able to conclude if this product is right for you. Alternatively, you might find that another type of insurance is a better fit for your situation. For instance, getting life insurance instead of credit insurance can be more economical.
Benefits
- Credit insurance covers the amount you owe if you skip your monthly loan payment.
- Credit insurance can cover repayments if you get injured or become unemployed.
- It minimizes the possibility of any impact on your credit score.
- If you unexpectedly pass away, payday loan insurance can pay a portion or the entirety of the loan.
Drawbacks
- Credit insurance often includes hidden fees.
- It can be very expensive.
- You’ll need to pay more interest in the event that the premium gets paid along with the advance.
- You can probably find an alternative cover that’s more suitable for your needs.
Questions You Should Ask
Below, we listed some questions the FTC advises borrowers to ask before purchasing credit insurance.
- What is the price of the premium coverage?
- Is the premium paid along with the loan amount? In the case where the answer is yes, but remember that it will raise your advance. Meaning, you’ll need to pay more in interest. Additionally, you’ll need to spend more on points (if your loan comes with points).
- Can I make monthly payments instead of covering the premium along with the loan?
- Will my monthly repayments be lower if I don’t get loan insurance?
- Will the loan insurance pay full length and the entire loan amount?
- What are the restrictions, exclusions, and limits on payday loans?
- Do I have to wait before the coverage gets activated?
- If I co-sign the loan with someone, what kind of coverage do they have, and what are the costs?
- Can I cancel the coverage? If yes, what refund options are available?
Am I Required To Buy Payday Loan Insurance Offered By The Lender?
Payday loan insurance is entirely optional, and you’re not obligated to purchase it from your lending provider. If they continue to convince you to take it, consider taking your loan needs elsewhere. This is a red flag you should always keep an eye out for.The lender can’t reject your application if you don’t purchase optional credit insurance. The lender also can’t deny you credit if you buy the insurance elsewhere. You can report such situations to the FTC, your state attorney general, or state insurance commissioner
