As more than 400,000 motorists prepare to pick up the keys to a new car when this Autumn's registration plates go live on September 1, payment protection provider Paymentcare warns those arranging personal loans to finance their cars not to be caught out by expensive loan protection cover.
While affordable APRs on many loans are seductive, signing up for payment protection insurance along with the loan can add thousands of pounds to the overall cost of the borrowing if bought through a high street provider.
“Many people are now taking advantage of low cost loans to buy a new car,” says Shane Craig, managing director of Paymentcare “But add on the cost of the insurance offered by the lender and monthly repayments could be significantly higher.
On a loan of £15,000 from a High Street lender, payment protection insurance could cost £60 a month.
Taking out cover from Paymentcare.co.uk however can save hundreds of pounds over the term of the loan as premiums typically cost around £16 a month to cover a £15,000 loans.
“Borrowers are often caught out by a double whammy, as most lenders add the cost of PPI as a single premium to the loan upfront – which means that borrowers are effectively paying interest on the insurance cover,” argues Shane Craig.