Payment protection insurance (PPI) is an insurance policy that is supposed to protectlending institutions when a borrower is unable to repay a loan due to loss of employment or sickness. It is sold alongside loans and credit cards. The only problem is, for many years, financial institutions failed to provide their customers with important information about PPI.

Over the last few years, many PPI policyholders have found out that the insurance sold to them was useless and they would not have been able to claim anything from it. Many of these consumers were misled into accepting these policies as part of their loan agreements.

Fortunately, to reclaim any PPI premiums that you may have paid plus any interest on those premiums. As long as it can be established that the policy was mis-sold to you, then you are eligible for a refund. However, if everything was done above board and no irregularities are found, then you don’t qualify for a refund.

### How much PPI will I get back on a £5000 loan?

Although there are many sites on the internet that purport to offer free PPI refund calculators, those calculators may not necessarily be accurate. How much PPI you are entitled to is determined by a number of factors that the calculators may not be able to incorporate into their calculations. your loan agreement should guide you on how to approach your case.

Let’s now calculate how much PPI you can claim on a £5000 loan. In this example, we will assume that the repayment period is six years at an interest rate of 6%and the PPI premium is 20% of the loan amount.

The PPI premium paid on this loan is: 20% x £5000 = £1000

Interest charged on the PPI amount is: (6% x £1000) x 6 years = £360

The total amount you have paid for PPI is: £1000 + £360 = £1360

In addition to this amount, you are also entitled to PPI compensation at a rate of 8% per annum on the interest paid.

PPI compensation will amount to: (8% x £360) x 5 years = £144

The total amount you should be refunded is: £1000 + £360 + £144 = £1504