Consumer loans are the most common form of lending. The main advantages of such loans are the speed of receipt and the absence of control by the financial institution regarding the scope of the money received.
The process of obtaining loans today is often accompanied by an insurance procedure. Like other types of insurance, loan insurance is associated with additional costs, which causes outrage among borrowers. People think that only a financial institution benefits from this service, which reduces the risk of loan defaults. But practice shows that insurance is beneficial to the two parties to the transaction.
Life and disability insurance related to obtaining a loan protects not only reliable banks, but also their customers from risks. 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.
In addition to disability insurance, there are other types of consumer loan insurance. One of its most common types is borrower business insurance. In this situation, money is paid if the company goes bankrupt or a person is fired from his job.
The loan repayment procedure is carried out on the basis of an insurance contract. This document indicates the object of insurance, the parties and the terms of the contract, the consequences of violating pre-agreed terms of interaction. It is a mistake to assume 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 companies issuing insurance and choose the best option for himself. You will spend a minimum of time studying the market, and this will save you money on insurance. If we are talking about the rating of mortgage banks, insurance costs can be reduced by 30 percent using the most advantageous offer.
In a number of financial institutions, insurance upon receipt of a loan is not mandatory. However, to show borrowers that it is beneficial to insure, financial institutions lower the interest rate on the loan.
