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Applications for personal loans traditionally soar in February as motorists borrow to finance the purchase of new registration vehicles – but leading stand-alone payment protection insurance broker Paymentcare warns borrowers to beware of expensive PPI bolt-ons to their loan offer.

March 1 is a red letter day in the motoring calendar as the first vehicles displaying the latest registration numbers roll off the forecourts.

But while APRs remain low on the most attractive personal loan deals, signing up for payment protection insurance along with the loan can add thousands of pounds to the overall cost of the vehicle.

“For many, a new car is a luxury but is affordable due to low interest rates,” said Shane Craig, managing director of Paymentcare. “But add on the cost of the PPI offered by your lender and your repayments will rocket.”

A loan of £15,000 from a High Street lender, for example, will cost around £300 per month over 5 years – a sizable financial commitment - but add on banks’ and loan providers’ average monthly PPI premium of £60 and the repayments on a standard family car rocket.

Protecting the same loan amount with Paymentcare will add just £16.50 per month.

“The cost of motoring is already steep and eats up a large chunk of the average household budget. Lenders’ PPI policies push this figure up even further. You wouldn’t pay double the pump price for your petrol so why pay it for PPI?” said Craig.

“The fact that lenders always add the cost of PPI as a single premium to the loan upfront means that years after your new car has depreciated in value you are still paying through the nose for it,” said Craig. “Paymentcare’s PPI policies are paid on a monthly basis meaning that the cost of PPI does not accrue interest.”

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