A personal loan presents an excellent opportunity to access funds for various purposes such as consolidating debt, pursuing higher education, fixing your car, or even going on a vacation. These loans can either be secured or unsecured. Secured loans carry more risk since they require you to provide collateral to guarantee loan repayment. If you fail to meet your repayment obligations, the lender gains legal ownership of the asset used as collateral, whether it’s your property, vehicle, or another valuable item.
Personal loans can significantly benefit individuals seeking to improve their financial situation, provided they manage their money wisely. However, life can throw unexpected challenges our way, including loss of income, unemployment, or health issues. These unforeseen circumstances can impact your ability to repay a personal loan, especially if it’s secured. To safeguard yourself from these potential hardships, consider investing in personal loan insurance.
Personal loan insurance is the ultimate protection against unexpected obstacles that may disrupt your repayment plans. The cost of this insurance varies, primarily determined by the outstanding balance of your personal loan. The specific type of personal loan insurance coverage you select will also influence the premium. Nonetheless, this insurance provides peace of mind, particularly for individuals with secured personal loans.
There are three main types of personal loan insurance coverage, and the coverage amounts depend on your state’s regulations and the loan amount. It’s essential to have a discussion about personal loan insurance with any lender you’re considering for your personal loan.
Personal Loan Death Insurance: In the unfortunate event of the death of one of the loan holders, this insurance will pay up to a specified dollar amount. If the personal loan was in the name of only one person, the outstanding balance will be fully covered up to the maximum amount. Although most personal loans have a maximum limit of $15,000, it’s not uncommon for individuals to take out multiple personal loans.
Disability Plus Personal Loan Coverage: This is the most commonly purchased personal loan insurance. It covers your monthly loan payments up to a certain dollar amount and provides a cash payment equivalent to a percentage of your loan amount each month to assist with living expenses.
Involuntary Unemployment Coverage: This insurance type is highly popular. It pays a set dollar amount per month in personal loan payments for a specified number of months in the event of involuntary unemployment.
Personal loans are valuable financial tools when used wisely. Personal loan insurance represents a responsible investment, ensuring your payments are made even in the face of medical issues, unemployment, or death. This insurance is particularly crucial for individuals with secured personal loans, as it not only protects their credit but also preserves valuable assets tied to their personal loan.
Personal loan insurance is affordable and often available through the lender. It’s essential to educate yourself about personal loan insurance and inquire about it when exploring personal loans. Most lenders are willing to discuss this option with you as it further assures them that they will receive the borrowed funds.