Cash loan with or without insurance?
Which loan should you choose?
There are many cash loan options available from banks. Most often they differ in terms of the required collateral, the possibility of allocating funds from the loan (any purpose or repayment of other credit obligations, i.e. consolidation) and whether a given credit product comes with an insurance package. We focus on this last aspect in this study. What are the advantages and disadvantages of the solution called: joining the insurance package against unfortunate mishaps offered to a person who concludes a cash loan agreement?
What does the insurance offered for a cash loan protect against?
The most-offered range included in group insurance that borrowers can sign up for includes:
- In the event of the borrower’s death;
- In case of serious illness;
- Permanent or total inability to work;
- In the event of job loss;
- Assistance – technical assistance at home (repair of home electronics / appliances, or a visit by a locksmith or plumber); medical assistance in the country (visit of a nurse or GP).
The insurance premium for protection contained in packages specially prepared for persons taking out a loan or cash loan is payable once in advance for the entire protection period and is subject to credit. What does it mean? Most often, the cost of insurance communicated by banks is expressed in percentage points per month as part of the loan amount – for example, in OutBank it is 0.27%, in Millenial bank 0.3%, and in Panko Bank 0.35%. Let us assume, therefore, that we are interested in the loan amount of PLN 10,000 “on hand”.
In addition, let us assume that we will repay our cash loan for a period of five years (60 months). Assuming for a cash loan case with a commission of 5%, which will be added to the loan amount, the insurance cost will be calculated as follows: loan amount plus commission x 60 x 0.35%. The cost of insurance protection will therefore be over PLN 2,000 (20% of the additional amount!), And the loan agreement will amount to over PLN 12,000 (we will have “only” PLN 10,000 at our disposal)!
What do we get in return?
Apart from the relatively interesting and broad scope of protection, joining the insurance allows us to take advantage of a more favorable interest rate on the nominal loan, which at OutBank is reduced compared to the option without credit by 2.5pp, at Millenial bank by 3pp, and at PB from 2 to 9pp.
The cost of a peaceful sleep
Despite the fact that the costs of insurance coverage seem quite high at first glance, the range offered is significant. An example of a five-year loan repayment period is up to 60 months, during which various unforeseen situations can occur, and it seems better for those “surprises” to be prepared. And this is exactly what these insurance packages give …