Monday, August 15, 2011

Can you afford PPI and do you need it?

There was a time when most people had no problem getting a credit card. Credit card companies were once relaxed about handing out credit, but that has all changed since the economic crisis. Credit card companies have become very reluctant to take risks and all of a sudden, where once you used to get credit very easily, you may now find it very difficult as lenders change their assessment criteria for lending. To make it even more difficult and unpredictable, different lenders will use different criteria to score you, so you can never be sure if a lender will accept you or not. The one thing you can do to help your case is to check your credit score with the credit reference agencies to ensure all the details they hold about you is correct. If you do have a problem with your credit rating and cannot get a standard rate credit card or one with special promotional rates, you may be able to secure a bad credit credit card instead. Credit cards for bad credit are ideal for rebuilding a poor credit score. The way to use these bad credit credit cards to your best advantage is to always use them strictly within the credit limit and always make payment in full and on time. The interest rate on these cards will be very high because the lender sees you as a risk, so the trick is to pay in full every month and avoid spending more than you can repay. PPI, or payment protection insurance, is often sold alongside your credit card. This insurance will make some repayments for you should you lose your job, or are unable to earn for some reason. Payment protection insurance has had a lot of negative press as it has been found to have been mis sold to many people. Some people did not know they were signing up to take it out, or they were sold a product that did not apply to them and would never pay out if they needed it. However, payment protection insurance is not always a bad idea if you feel insecure about the stability of your job. Nevertheless, the policies on offer with your credit card are generally at the expensive end of the market. If you feel that you need it, you should shop around for independent providers to see if you can get a better rate. A typical rate for credit card protection would be 65p for every £100 outstanding on your credit cards. If you are taking out credit cards for bad credit, you really should be operating them by paying in full monthly and not leaving any outstanding debt to be charged at a higher than average interest rate. For this reason, you may not really need payment protection insurance for a bad credit card, as your debt should be cleared at the end of each month. If you need a bad credit credit card and feel that you may be at a high risk of losing your job and may end up not being able to make full monthly repayments, then it is something to consider. If you feel the risk of not being able to repay your debt is high and can afford the monthly PPI premium, then check the market carefully and make sure whatever you sign up to will pay out in the right circumstances.

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