Have you ever wondered what can be done if you are unable to repay your personal loan? Any situation such as a setback due to unemployment, sudden deterioration of health, or even death can cause a mishap in your financial life. A personal loan insurance is nowadays considered as the solution in such conditions.
This is why in this article, we will be talking all about personal loan insurance.
What is a personal loan insurance?
Until recent times, loan insurance was a concept which was only available for home loans. However, now it has also become available in other forms of credit, including personal loan insurance.
A personal loan protection insurance helps you cover the inability to repay the loan due to unfortunate circumstances such as death, unemployment, or due to medical conditions. The responsibility of repaying the personal loan will not fall on your dependants or your family. You can choose to pay the premium along with your personal loan EMI payments. You can pay the premium upfront or in equal installments.
Now that you know what a personal loan insurance is, here are a few factors that you need to consider before applying.
Check your affordability
Paying your premium for a personal loan insurance will be an extra expenditure. Therefore, it is necessary to assess whether you are financially comfortable to pay the premiums. Make space in your monthly budget plans to pay the premium, either in installments or in a lump sum. However, paying in installments also attract interest making the process costlier.
It is not mandatory
A personal loan insurance is not mandatory for loan borrowers. There might be situations wherein the bank might sell it to you. However, it is you who has to decide whether you require the cover or not. For example, a personal loan insurance is not useful if you have a significantly higher amount of life insurance cover.
Compare the different personal loan insurance offers
Very often, a personal loan insurance will be a last minute purchase when the bank executive tells you about this option. However, this could become a costly purchase, given that it was sudden and you could not do a homework on different offers.
The offers on the premium rates differ from company to company. Therefore, it is necessary to do a comparison of different offers. For example, there are many loan insurance covers that do not cover situations of job losses. Now, if you are part of the specified category, then you won’t be able to benefit from the same.
Know your personal loan insurance
It is advisable to know the terms of service offered before opting for a personal loan insurance. This will help you prevent situations wherein you are not able to claim the insurance.
Check on the preclosure charges
In most cases, when you foreclose a loan before the set tenure, you are likely to lose the insurance benefits associated with it. Therefore, you should know whether there would be any refund of the premium paid or will it be nullified.
Taking a personal loan insurance is always a good option, provided you did a complete homework on the terms of service offered.
To guide your choice, we at IndiaLends checked personal loan Interest rate of all banks including ICICI personal loan and more.