Posted By: Dr. Frugal in Loans on 06/27/2007 at 09:39:07
Don't waste money buying any of type of credit insurance from credit card or financing companies. Credit life insurance pays the balance on a loan if you happen to die. Credit property insurance will cover damage to an item that you're buying with the loan's funds. Credit disability insurance makes loan payments if you become disabled and involuntary loss of income insurance makes your loan payments if you're involuntarily unemployed.
Undoubtedly you'll be offered one or more of these when you buy a car. Some dealers add them in WITHOUT TELLING YOU. They earn a substantial commission from the insurance company by selling the insurance AND they get the interest on the premium when they add it into your loan. Insurance tied to a specific debt is a very expensive way to insure yourself against a loss. If something does indeed happen, only the payments for that particular item are covered. If you really feel like this coverage is necessary, talk with your insurance agent about a more comprehensive policy; specifically ones that would benefit a spouse or family member instead of the lender.
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