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12 Jul 2020

News

PPI price rises – adding insult to injury

Michelle Slade, personal finance analyst at Moneyfacts.co.uk – the money search engine, comments:

“With PPI currently under the OFT microscope and being seen as an ‘overpriced, inflexible’ product, you may have thought lenders would be reluctant to rock the boat further. However as the moneyfacts.co.uk survey shows, for many providers the price has continued to climb over the last year.

“Although the average cost of personal loan PPI has not changed, there have been some hefty changes in premiums from a number of providers.

“The tables below show the most significant increases and reductions, as well as those which have remained unchanged. (Based on a loan of £5,000 over 36 months)

PPI Increased

Monthly PPI Cost £

Increase in PPI cost £

June 06

June 07

Per month

Over 36 months

Direct Line

Personal Loan (tel)

14.12

24.50

10.38

373.68

Lloyds TSB

Direct Personal Loan

21.12

28.77

7.65

275.40

Alliance & Leicester

Personal Loan

21.13

27.39

6.26

225.36

Liverpool Victoria

Personal Loan

20.43

26.30

5.87

211.32

Liverpool Victoria

Online Personal Loan

22.30

27.36

5.06

182.16

 

 

 

 

 

 

PPI Reduced

Monthly PPI Cost £

Decrease in PPI cost £

June 06

June 07

Per month

Over 36 months

RAC Financial Services

Personal Loan

35.23

26.78

8.45

304.20

Norwich Union

Personal Loan

32.63

26.78

5.85

210.60

Cumberland BS

Personal Loan

26.91

21.34

5.57

200.52

Dudley BS

Personal Loan

26.91

21.34

5.57

200.52

Furness BS

Personal Loan

26.91

21.34

5.57

200.52

 

 

 

 

 

 

No change but still expensive

Monthly PPI Cost £

No change in PPI cost

June 06

June 07

 

 

Abbey

Personal Loan

25.99

25.99

No change

No change

Black Horse

Online Personal Loan

26.22

26.22

No change

No change

Black Horse

Personal Loan

23.33

23.33

No change

No change

Egg

Eggloan

26.41

26.41

No change

No change

First Direct

Personal Loan

24.34

24.34

No change

No change

Marks & Spencer Money

Personal Loan

26.55

26.55

No change

No change

Marks & Spencer Money

Online Personal Loan

26.55

26.55

No change

No change

Nat West

Online Personal Loan

24.39

24.39

 

 

Royal Bank of Scotland

Online Personal Loan

22.89

22.89

 

 

 

“The cheapest cover for a £5k loan over 36 months still remains around £14, and the most expensive at £35. This means by choosing a loan with the most expensive PPI could cost you as much as £756 more over the three year term. Not only does the price vary, so does the level and type of cover provided, with differing terms, qualifying periods and conditions included.

“Also because your insurance premium will be added to the amount borrowed, the total amount payable can fluctuate further still, depending on the interest rate you are charged.

“While it can not be disputed that insurance against, life, accident, illness or unemployment can prove invaluable in some circumstances, the downside is the cost, inflexibility and the sales process associated with loan PPI.  The huge profit margins on PPI are illustrated further by the fact that independent providers can offer the same cover at a fraction of the price.

“The examples below just show how competitive these deals can be, offering savings of between £500 and £1200 compared to the policies offer by the loan providers.

Independent Provider

LASU

ASU

Total cost to insure monthly repayments for a £5K loan over 3 years (£150 per month)

Paymentcare.co.uk

£8.25

£5.93

LASU - £297
ASU - £213.48

Post Office – Lifestyle Protection

 

£6.75

£243

British Insurance
(Premium depends on age)

 

£3.98 (person aged 25) / £8.33 (person aged 45)

£143.28 (aged 25)
£299.88 (aged 45)

 

 

 

 

“Don’t feel bullied into taking the loan providers insurance, as this should have no impact on whether your application is accepted. Remember to check out the full terms of any loan agreement you sign: in some cases you may be required to opt out from the insurance rather than opt in. 

“Any savings made on choosing a competitive insurance policy could be put to better use by repaying your loan earlier.

“It is right that PPI is under investigation for its ‘rip off’ pricing and unfriendly features and practices – so an increase in its price is just rubbing salt into an already very deep wound.”

 

Moneyfacts Group
Moneyfacts is the UK’s leading independent provider of personal financial information and our data is used and trusted throughout the financial industry. 

 

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