In order to realize your project faster, you have chosen to take out a loan.
During an interview, your banking advisor suggests you use insurance to cover your personal loan . And there, you hesitate to accept or not the suggestion.
If you have not yet given your approval, find in this article some tips that will help you understand the importance of subscribing to a borrower insurance, even if this option is optional.
The principle of loan insurance
Loan insurance, also called borrower insurance is an insurance for individuals or professionals who choose to take out a loan from the bank or credit agency. Although this option is a legal requirement, it is a guarantee that credit institutions recommend to their clients during the preparation of their loan file.
Loan insurance is a guarantee that protects the borrower, his or her family and the lender against possible risks that could prevent the borrower from making a repayment of his loan.
As a result, when you take out loan insurance, you are primarily responsible for your own protection, in the event of partial or total disability: events such as job loss or illness may prevent you from continue to repay your debts in full. If you have taken out loan insurance and you may become disabled due to an accident or illness, your insurance company will take over and pay the outstanding balance with your credit institution.
The type of reimbursement is based on what was agreed when you subscribed to your insurance contract: the insurance can take care of repaying the remaining capital that you could not pay or make the refund by the payment of monthly installments of the loan. Today, to minimize the risk of default, credit institutions advise their customers to always subscribe to loan insurance, regardless of the nature of their credit: business loans , consumer credit, revolving credit …
Loan insurance: a protection to ensure the full repayment of your loan
As a guarantee, credit insurance not only protects the borrower but also his or her family and even the organization that provided the loan.
Regarding the borrower, a loan insurance will allow him to take out a loan with more serenity, knowing that in case of illness or accident, repayment of his loan will continue. He will also be more serene, knowing that his relatives will be protected and released from debt, if he ever dies or becomes disabled, before the total repayment of his loan.
Indeed, some people who die before the full repayment of their loan can bring their loved ones to pay their debts.
With loan insurance, relatives or descendants of the borrower will not have to bear the expenses related to the repayment of the loan taken out by the deceased or invalid borrower.
In such cases, it will be up to the insurance company to fully or partially settle the credit contracted by the borrower. For an overview of the fees that loan insurance could incur, you will be able to simulate loan and compare loan offers that also offer insurance with cheaper fees. For the lender, your loan insurance is a sort of guarantee that the money it gives you will be repaid, even if the borrower is no longer able to continue its reimbursement.
Personal credit: the benefits it represents
Like most loans, personal credit can be of great benefit to the subscriber. In the majority of cases, it provides the subscriber with some freedom, since he does not have to justify the use of the credit with the financial institution that offers the credit.
The personal loan also allows the subscriber to better manage his financial situation, since the monthly payment remains fixed, the repayment period known in advance and repayment can often be spread over several years. With personal credit, the subscriber can finance his personal projects, without committing all his savings at once.
In addition, he generally has several years to make the repayment, which allows him to repay gradually while having the opportunity to build a cash.