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 donít 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.
Letís 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
There are some factors that might make your case a little bit different from the illustration given here. For example, if you are still repaying your loan you will be refunded a PPI amount equivalent to the amountyou have paid so far. Also, if you cleared your entire loan earlier than expected, the interest paid on the PPI will be calculated based on the years the loan was due.
Where should I go to reclaim my mis-sold PPI?
The best option is to call or go directly to the lending institution. If they accept your claim, they will advise you on the entire refund process. If you donít have the time to follow up on your claim, you can hire the services of a claim management company to do it on your behalf.
Before you choose any such company, itís advisable that you check their credentials to ensure that itís not one of the many unscrupulous companies out there.
Image Credits: Payment protection insurance†from g0d4ather/Shutterstock