When you take out a finance agreement, it’s usually on the assumption that your personal circumstances won’t suddently take a turn for the worse.
However, illness and redundancy are everyday occurrences – and they could potentially affect you too. If you were to lose your job and not be able to work for a period because of illness, you could end up losing your car because you can’t afford to keep up the payments on it.
This is when you need payment protection, the idea being that if things go pear-shaped for you in some way, this form of insurance takes over and your repayments continue to be paid for you.
There may be a limit to how many payments are made under the scheme
Here's how it works and what you need to watch out for:
- Payment protection is normally paid monthly, at the same time as any finance repayment.
- Not everyone is eligible for it; if you’re long-term sick or self-employed, you probably won’t be able to take it out.
- There may be a limit to how many payments are made under the scheme – don’t expect your car to be paid off necessarily.
- Payment protection may also not kick in immediately – you may have to find the money for the first three months after a change of personal circumstances.