Personal loans are the most common form of lending. The main advantages of such loans are the speed of obtaining and the absence of control by the financial institution regarding the scope of the received money.
The process of obtaining loans today is often accompanied by an insurance procedure. Like other types of insurance, loan insurance is associated with additional spending, which causes outrage among borrowers. People think that only a financial institution will benefit from this service by reducing the risk of loan defaults. But practice shows that insurance is beneficial to both parties to the transaction.
Life and disability insurance associated with obtaining a loan protects from risks not only reliable banksbut also their clients. If an accident occurs, the insurance company will help the client and cover his debt to the financial institution. The bank, having received money from the insurer, will also benefit.
Besides disability insurance, there are other types of consumer loan insurance. One of the most common types of insurance is the borrower's business. In this situation, money is paid if the company goes bankrupt or the person is fired from work.
The loan repayment procedure is carried out on the basis of an insurance contract. This document specifies the object of insurance, the parties and the terms of the contract, the consequences of violating the previously agreed terms of interaction. It is a mistake to believe that the cost of insurance is the same in all companies. Some banks work with only one specific company, but if there is a choice, the client is free to familiarize himself with the terms of several insurance companies and choose the best option for himself. You will spend a minimum of time studying the market, and this will allow you to save on insurance. If the conversation is about rating mortgage banks, insurance costs can be reduced by 30 percent by taking advantage of the best deal.
In a number of financial institutions, insurance is not required when obtaining a loan. However, in order to show borrowers that it is profitable to insure, financial institutions lower the interest rate on the loan.
