Taking things on credit be it in the form of loans or credit card spending simply mean that you are in debt and you need to repay the same at the earliest to come out of the debt. Things may not be posing any problems for you until the time you are current on your payments and your income is static. However, if you lose your income because of any reason you will begin to feel the stress and you will start to worry about the repayment of the debts.
If the financial constraint or the hardship is short lived you can still be better as you restore the situation but if the hardship lasts long and your income really goes down to the levels where you are unable to repay your debts completely than it is a matter of serious concern.
What happens in most of the cases is that such payments often break the backbone of the individuals and the non-repayment makes them vulnerable to the collectors and their disturbing calls. The situation is really critical as on one hand one does not have the money to repay their debts while on the other hand, they have to face the calls of the collectors. The only way to come out of this situation is to get yourself covered by the loan insurance.
Credit Rating And Loan Defaults
In case you are facing tough financial times, you will be required to keep your debt repayments current. Not doing so will mean defaults on your end and the same will reflect on your credit history thereby impacting your credit rating in the long run. A sudden dip in your credit score can be attributed to this. Lenders do not see this development as a good sign towards your finances and you will be required to deal with the situation in an emergency and come out of it at the earliest.
How does the Loan Insurance Help? Loan insurance is an agreement made between the insurer and insured for the payment of the debts in case the insured fails to do so under certain circumstances which are beyond their control and do affect their financial status badly. However, it was in 2005 that the loan insurance came into the highlight with a lot of cases of miss-selling being reported along with cases of improper advice and lack of transparency by the lenders and their officials.
There were cases where it was sold to individuals who did not need it. In other cases, there were instances where the individuals were not explicitly told about the nuances involved and the way the premium is calculated and the way it will impact their monthly EMIs. In most of the cases, it was the game plan of the lenders to secure their loans by means of the loan insurance because they knew that the payments will be given by the insurance companies to the lenders in case the borrowers failed to do so.
In general, if you wish to take a loan insurance policy you will be offered a quote by the insurance company which will be dependent on the age and the amount of coverage one requires. Once you receive the quote you have the right to accept the same from the company or look out for other companies where you can compare the quotes offered by them and then take a final decision on the company which suits your requirements the best.
Based on your agreement a premium amount will be finalized which will be then added to your total loan amount and you will be required to pay the premium along with the monthly installments that you pay towards your installment loans for bad credit.
Most of the insurance companies would begin the coverage after a shorter waiting period which generally ranges from 0- 90 days. Once the waiting period is over and you meet any emergency during the period the insurance company is liable to make the payments to the creditors on your behalf as per the agreement you have entered into with them.
One should clearly check on each and every detail related to the coverage, the terms, and conditions before actually signing the dotted line.