Is it compulsory to take insurance before securing a Personal loan?

Personal loan

When we think about borrowing money from the best loan apps, most of us still think of Personal loans. One such reason for having this line of thought is because personal loan comes with no-end usage factor. That is, one could use personal loans for medical bills, home improvements, debt consolidation, etc. Personal loans are unsecured loans that anyone can use to fulfill their emergency and non-emergency financial requirements. Personal loans, unlike home or auto loans, do not require any collateral or security. The eligibility for a personal loan is often determined by characteristics such as income, credit history, and repayment capacity.

Consider the following scenario: you have a personal loan but are unable to repay it due to a permanent disability, serious sickness, redundancy, injury, or death. This is where personal loan insurance comes in. It safeguards the policyholder against default by covering loan repayments or the outstanding balance. Many of us aren’t aware that one can take personal loan insurance. In this blog, we will understand just that and throw light on the significance of insurance while applying for either best loan apps or any type of loan.

Types of Personal Insurance Policies

Considering the fact that personal loans come with shorter loan terms, the cost of a personal loan insurance plan is also on the low end. To meet the needs of a buyer, the following coverages are available:

Single and regular premium reduction coverage: In this, the premium amount falls as the outstanding loan amount decreases over the loan term.

Coverage at a single and regular premium level: In this, the premium amount remains constant even if the outstanding loan amount is reduced.

How does Personal Insurance Function?

The mechanism can be compared to that of any other type of insurance. You can pay the insurance premium in one lump sum or as part of the EMIs. The premium you pay for personal loan protection varies depending on the lender. It is often determined by parameters such as loan amount, age, health status, and tenure.

However, one needs to know that a protection plan is expensive since the premium imposed by the insurer greatly increases the cost of your personal loan. You can pay the premium in one lump sum or in monthly installments. It should be mentioned that the EMI option is also popular, which raises the price. As a result, before you take the leap, make sure your monthly budget can handle the higher premium payout without hardship.

Why Consider Personal Loan Insurance?

While Kreditbee personal loan does not specifically require insurance for securing a personal loan, they strongly advise borrowers to do so. Let’s understand the benefits of having insurance:

Helps you mitigate the risks: Insurance can help to mitigate the financial risks associated with personal loans. While having insurance is not required to acquire a Kreditbee personal loan, it can provide a safety net for both the borrower and the lender.

Provides protection to the Borrower: Life is unpredictable, and unanticipated events such as accidents, impairments, or sudden death can occur at any given point in time. In such cases, having insurance coverage can give the borrower and their family financial security. Personal loan insurance or credit life insurance, for example, can help repay the outstanding loan amount in the event of the borrower’s disability, serious sickness, or death. This ensures that the borrower’s family is not burdened with loan repayment.

Other benefits of choosing Personal Loan Insurance:

Some banks or best loan apps offer loan insurance with personal loans, however, it is up to the borrower to accept or decline the policy. There are various advantages to purchasing loan protection insurance, including:

  • Loan insurance programmes decrease a borrower’s outstanding loan and cover his or her monthly loan payments in the event of an unfortunate occurrence such as job loss, accidental death, or temporary disability.
  • A loan protection insurance plan ensures that the borrower’s family is not faced with an unexpected financial obligation to repay the loan.
  • Some loan protection insurance products may qualify for Section 80C tax breaks.
  • Some personal loan insurance policies include money-back guarantees, in which the customer receives a set sum at the end of the policy.

What to consider if you are planning to take insurance?

If you are considering a Kreditbee personal loan, here are a few insurance considerations:

Understand the scope of Coverage and Terms: Understand the insurance policy’s coverage as well as the terms and conditions attached to it. Learn about the events covered, exclusions, the claim process, and any associated charges.

Affordability: Consider the cost of insurance premiums and whether they are within your budget. Remember to include the cost of insurance when determining the total cost of the loan.

Existing Protection: If you already have life/ health insurance or both, examine whether it provides adequate protection. If you have appropriate coverage, you may not require additional insurance.

Employment Stability: If you have steady employment with a steady income, your chances of being laid off are slim. Personal loan insurance may be less important in such instances.

Financial Reserves: Examine your emergency reserves and emergency funds. Personal loan insurance may be unnecessary if you have considerable savings that can cover loan payments during unexpected situations.

Loan Amount and Payback Terms: Think about the loan amount as well as the repayment terms. The potential risk may be decreased if the loan amount taken from the best loan apps is small and the repayment time is short, decreasing the requirement for personal loan insurance.

Risk Assessment: Consider your specific circumstances, such as your age, health status, dependents, and financial obligations, to determine the level of risk you may face before you apply for a loan on best loan apps. This might assist you in making an informed insurance decision.

So point to be noted here is,

From the lender’s perspective, Kreditbee personal loan insurance helps to minimize the risk involved with lending. If a borrower is unable to repay a loan due to unforeseen circumstances, insurance coverage can ensure that the outstanding loan amount is collected even if the borrower is not there. When applying for a personal loan either from a bank or best loan apps, it is critical to carefully examine your specific circumstances and make an informed decision on insurance. This decreases the likelihood of bad debts for the lender and adds an extra degree of security.

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