Consumer loans are the most common form of lending. The main advantages of such loans are the speed of receipt and lack of control by the financial institution regarding the scope of the received money.
The process of obtaining loans today is often accompanied by an insurance procedure. Like other types of insurance, loan insurance is associated with additional spending, which causes borrowers indignation. People think that only a financial institution wins this service, which reduces the risk of non-repayment of a loan. But practice shows that insurance benefits the two parties to the transaction.
Life and disability insurance, connected with obtaining a loan, protects not only reliable banks, but also their clients from risks. If an accident occurs, the insurance organization 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 working capacity insurance, there are other types of consumer loan insurance. One of the most common types of insurance is the borrower's business insurance. In this situation, money is paid if the company goes bankrupt or a person is fired from work.
The loan is repaid on the basis of an insurance contract. This document indicates the object of insurance, the parties and terms of the contract, the consequences of violation of the previously 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 particular firm, but if there is a choice, the client is free to familiarize himself with the conditions of several companies issuing insurance and choose the most optimal option for themselves. To study the market you will spend a minimum of time, and this will allow you to save on insurance. If talking about the rating of mortgage banks, the cost of insurance can be reduced by 30 percent, taking advantage of the most advantageous offer.
In a number of financial institutions insurance for obtaining a loan is not mandatory. However, in order to show borrowers that it is profitable to insure themselves, financial institutions reduce the interest rate on the loan.
