PPI is an Insurance Policy aimed at protecting the payments of your loan if you are ever unable to make them due to sickness or redundancy from work. In theory, it is an Insurance Policy that should work very well, especially in the current economic climate. However, it has been recently criticised by various Government bodies, who have concluded that the current method of selling PPI should be banned. It is now seen as nothing more than a way for the banks to increase their profits. In fact, Banks have earned in excess of £5.5 billion per year from the sale of PPI.
PPI is sold to you when you take out a personal loan and the cost of the Policy (which can often be up to 40% of the amount that you have borrowed) is added to the amount that you borrowed, incurring further interest. This is a very expensive way of funding the Policy and is often not even explained to you.
In addition, the sales representatives of the banks can often make you feel that the Policy is a condition of the loan, which is not the case. PPI is an optional insurance and should only be purchased if you want to purchase it.
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