An asset based lending involves some risk also. No doubt, you get loan at a low rate of interest but if you do not take proper care and precaution you may land yourself in trouble. If you have taken a loan by pledging your home, you should ensure that you repay your instalments regularly. Otherwise, lender may repossess your home.
One way to protect yourself is to opt for payment protection insurance (PPI). Even if you are sure about repaying your secured loans in time, you can never take life for granted. You may meet an accident and render yourself unable to work for next 2-3 years or even permanent disability may result. Therefore, you should make sure that your home is not at risk. For this purpose, you can take PPI.
Secured loans and PPI make a good combination; you get loan at low rate of interest and cover significant risk with PPI. Usually, PPI protects and maintains your repayments should you become unable to keep up your repayments due to accident, sickness or unemployment. The PPI does not protect you in every situation except those against which you are covered in the PPI policy. Sometimes lenders make you believe that by taking out a PPI your repayments have been fully secured. But, this is not true.
Before taking out a PPI policy against secured loans, you need to weigh various options. Some plans cover sickness and death while other may also cover job loss, business failures, etc. So, choose the plan carefully and be prepared to pay the premium for taking out PPI. The premium is a yearly amount that you need to pay.
Secured loans can be used for a number of reasons. You may choose to consolidate your old debts or add another floor to your home. Whatever it is, secured loans provide you a good opportunity to borrow big amount and take care of your financial needs.
