PPI covers loan customers in the event they are unable to earn enough money to meet their repayments, whether owing to an accident or loss of a job.
However, online data comparison service Moneynet is advising borrowers that it is not necessary to take the PPI offered by the loan lender, adding that this rarely represents the best deal and consumers could reduce the duration of their loan by looking elsewhere.
Cheaper premiums can usually be found with an independent broker, Moneynet says, while also citing the difference between loan and PPI deals on offer at Norwich and Peterborough Building Society and Northern Rock.
A Norwich and Peterborough £5,000 loan for five years, with a rate of 8.9 per cent, costs approximately £152 a month if PPI is included. This compares to £114 at Northern Rock, where a similar loan has a rate of just 5.6 per cent.
Richard Brown, Moneynet chief executive, said that “astronomical PPI charges” are proving extremely lucrative for lenders.
“With consumer debt at record levels theres huge competition for loan business,” he advised.