Whether by necessity or by choice, many people opt for loans to finance their projects, at the risk of seeing their debt ratio exceed the critical limit of 33%. Therefore, it becomes difficult to manage the various monthly repayments. It is thus advisable to opt for a repurchase of credit to avoid finding yourself in over-indebtedness. In addition, the lending institution offers insurance to its borrower. It is therefore important to know whether this insurance is compulsory or not.
Everything you need to know about loan insurance
This is a contract that allows you to reimburse the amount granted, whatever the circumstances. The borrower insurance is very useful, because it allows to cover the borrower in case of loss of income, but it also ensures the repayment of the amount borrowed to the lending institution. As with any other type of insurance, the borrower in return pays an annual premium, the amount of which depends on credit.
The rates for borrower insurance vary depending on the length of the loan, the age of the client and their medical record, among others. For example, the older the borrower, the higher the premium. Whether it is a consumer loan or a repurchase of credit, you must know how to differentiate between two types of borrower insurance:
- Group insurance: also called group insurance, it is often offered by the lending institution (bank or other). As the name suggests, this type of insurance is the same for all borrowers from the financial institution with a small difference that depends on the amount borrowed.
- Individual insurance: when the borrower is not satisfied with his bank’s proposal, he can request an insurance delegation. This time, an insurance company will take care of covering the loan.
Is it compulsory to have insurance when buying back a loan?
The repurchase of credit makes it possible to group together different loans into one, which allows the borrower to have a single loan with a single monthly payment to be repaid over a single period. It will thus be able to benefit from a reduction in its debt ratio. The repurchase of the loan remains the best way to have a financial balance and to consider other investments. This type of operation concerns consumer loans (auto credit, works, auto, etc.) as well as mortgage loans.
It is strongly recommended to consider borrower insurance at the same time as a credit redemption. Admittedly, the latter is designed to alleviate the situation of the borrower, but the duration of the new credit will become longer. Taking out borrower insurance when buying a loan allows you to reimburse in the event of:
- Permanent partial disability (PPI);
- Total permanent disability (IPT);
- Temporary disability from work (ITT);
- Total and irreversible loss of autonomy (PTIA);
- And in the event of death.
The subscription of borrower insurance at the time of a loan repurchase is not mandatory, but some banks may require their customers to take out insurance, in order to be able to protect the loan amount. This is particularly the case for mortgage loans which represent a heavier debt. The amount borrowed is often greater than other loans and the term of this type of loan is also longer.