Credit life insurance is among the most misunderstood personal finance products. The kind of coverage sold to debtors by creditors range from the standard credit life and sickness or accident cover to such insignificant contracts such as life events.
Most of these coverage policies are usually overpriced and provide substantial profits for providers and sales finance firms. If you want to get the information about credit immediately then hop over to this website.
The use of cover as a form of security for a loan is not really a bad option. Both the debtor and the creditor may benefit from eliminating the risk of disability or death from the equation.
If the reduction in risk is an aspect in offering a reduced interest rate it could be a win-win situation. The trouble arises, nonetheless, when the creditor induces a customer to buy a coverage product not to minimize risk but as an extra source of income.
Coverage rates are usually set by the cutthroat market, which are inclined to hold interest rates down for the informed customer who does a little comparison shopping.
Motor vehicle coverage companies, for instance, are highly competitive and the interest rates are rarely regulated. Although with regard to an application for an advance there might be no competition at the sale point of the cover.
The creditor might be the only practical source. The only competition is normally between coverage companies to see who could charge the maximum payment and pay the maximum commission to the creditor for selling the cover.
This usually forces interest rates to go up instead of down and has been referred to as reverse competition.