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A DWINDLING range of options and rising rates for adverse credit customers will put more pressure on borrowers who are already at the margins of affordability, says stand-alone payment protection insurance provider

“Those who have no choice but to accept deals at rates well above mainstream borrowing should make sure they have considered how they will maintain the demanding repayments should their income fail them,” says managing director Shane Craig.

As increasing numbers of lenders clamp down on their lending criteria following the US sub prime mortgage debacle, consumers who have no hope of being accepted for prime mortgages or standard credit cards have no choice but to accept deals carrying punishing rates – or not borrow at all.

“It can take years for a history of mortgage arrears, bankruptcy and CCJs to drop off consumers’ credit history report, but life goes on and these people still need mortgages and credit the same as anyone else,” says Craig.

“But it’s very often the case that those least able to afford the repayments are charged the highest rates and have the fewest options, meaning that if they don’t put adequate protection in place, they could be making matters worse instead of getting back on their feet.”

Stand-alone payment protection insurance for both mortgages and credit cards can be bought for just a few pounds - and at much lower rates than lenders’ own protection - and could mean the difference between staying afloat or sinking like a stone should illness or job loss strike.

As smaller mortgage lenders call in their adverse credit offerings the choice of products is diminishing and the deals offered by mainstream firms come at a price. Rates are either sky high, as much as 9.99 per cent with Alliance &Leicester*, or lower with the Chelsea Building Society* but with considerably reduced LTV and fairly strict criteria.

Credit card deals for borrowers with poor credit credentials are also available but again, rates can be eye-wateringly high - the Vanquis credit card comes with a 39.9 per cent rate, rising to 59.9% for customers with the worst records. Whilst there is a 56 day interest free period offered after the borrower has demonstrated their ability to pay the first two months’ balance in full and on time, should things go awry and a repayment is missed, it’s one step forward and two steps back on the road to credit recovery. is the UK’s only provider of stand-alone credit card PPI with premiums of just 65p** to protect each £100 of outstanding balance - in other words, it would cost £6.50 per month to protect an outstanding balance of £1,000. Crucially,’s policy would pay 10 per cent of the outstanding balance each month unlike some lenders’ own PPI cover which pays as little as three per cent – hardly sufficient to make much of a dent in the debt.

MPPI from starts at just £2.25*** per £100 of cover, making a monthly premium of £20.25 to provide a monthly benefit of £900.

“Every Christmas, millions of UK consumers get deeper into debt as they spend more than they can afford,” says Craig. “For those who have already amassed a collection of adverse credit entries on their credit report, risking their future recovery by continuing to borrow without protection could be considered reckless.”

* Source:
** LASU (Life, Unemployment Sickness & Accident) – 23 November 2007
*** Low Rate AS (Accident & Sickness) – 23 November 2007