UK consumers who buy payment protection insurance (PPI) from their lender could be paying five times more than those who shop around, according to new research.
The policies are often sold with loans, mortgages and credit card repayments to insure the borrower against any loss of earnings. Price comparison website uSwitch.com has found that banks are charging high rates for the insurance and, in the case of NatWest, taking out PPI more than doubles the cost of the loan.
Website uSwitch said it had found examples where buying cover from a high street bank rather than a specialist provider would increase the cost by 467%.
Consumers who take out PPI with their loan, need to be conscious that the APR increases once PPI is added to the loan amount – in some cases this can be by as much as 11%, said Nick White, head of personal finance at uSwitch.
More worryingly for consumers, is that the cost is sometimes added to the total amount borrowed and then interest is charged on both.
A recent investigation by the FSA highlighted the issue when it found that many banks were mis-selling the insurance to increase profits and said it would be further investigating some cases.