Borrowers unable to protect their loans

The economy in the UK is in a particularly unstable condition right now. Although the country has officially come out of the recession, the prospect of difficult times and rising unemployment seems impending over the course of the next couple of years.

About one in three borrowers with a home owner loan or mortgage on their equity does not have satisfactory protection in case anything happens to them, such as illness or redundancy.

The finding comes from a recent study carried out by Property Portfolio Rescue and according to it nearly a third of the population with a secured loan on their home would go through financial difficulties for a period up to three months, if they were to be dismissed from work.

It has also been revealed that about half of all the respondents of the survey were depending on the interest rate on their home owner loan remaining at its currently low level for the next few years and that they would not be able to make their regular loan repayments if interest rates were increased, which can be expected because of the high level of inflation we are observing at the moment.

The problem can be solved by taking out loan protection in the form of a Payment Protection Insurance (PPI) policy, which will cover the loan repayments for a standard period of one year in the event of redundancy.

However, the negative publicity surrounding PPI plans during the course of the past few years and the number of complaints received by the Financial Ombudsman, many borrowers do not want to spend money on this type of policy, deciding instead to incur the risk of losing their property if they are unable to make their loan monthly repayments.
 


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