When applying for an unsecured consumer loan, customers will be advised by a credit officer about the "loan insurance" fee. However, not every employee also proactively advising on this fee to customers leads to unfortunate misunderstandings.
So loan insurance, loan insuranceWhat is y? How is loan insurance calculated? Is loan insurance mandatory?
In this article, Banktop will answer customers' questions question this problem in detail.
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What is loan insurance?
Loan insurance is an insurance package applied to ensure that a customer's loan is still paid in case the customer is no longer able to pay due to some reason such as permanent disability, death. die…
Loan insurance is usually only applied to contracts unsecured loan Bank.
Loan insurance is regulated by the bank and is based on the loan amount installment loan of cutomer. The loan here can be a mortgage loan, a consumer loan to buy a car, fast loan same daypersonal expenses or short-term loans.
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What are the conditions for participating in loan insurance?
To be eligible to buy loan insurance when making a bank loan application, you need to meet the following criteria:
- There should be full behavior and legal responsibility.
- The loan is approved to be disbursed by the bank or credit institution.
- Applies to ages 18-60.
- Applicable for loans from 10,000,000 VND - 500,000,000 VND
What are the benefits of loan insurance?
Firstly, loan insurance is considered as a measure to limit the bank's risk in providing loans to customers. However, buying loan insurance for customers also brings many practical benefits.
- While paying the loan, if there is an accident that leads to death, permanent total disability or is reported missing, the insurance company will be responsible for paying the amount on behalf of the customer. The remaining principal and interest (not exceeding the amount specified in the insurance contract) that the customer owes the bank/financial company.
- With this function, borrowers and their families will avoid financial burden when problems occur. This makes more sense when customers borrow large amounts of money.
For the lender
- The customer's participation in loan insurance will help the company ensure that the principal is still collected (from the insurance company) if unfortunately the customer encounters the risk of force majeure, cannot repay the loan.
- With unsecured loans, participating in loan insurance is also a reliable basis to help banks and other credit institutions easily make loan approval decisions. In particular, some credit institutions also consider reducing loan interest rates for customers with loan insurance.
See also: What is credit risk?
How are mortgage insurance premiums calculated?
For mortgage loans, premium rate regulated depending on the bank and collateral. However, unsecured loans have a higher level of risk, so unsecured loan insurance is also increased to ensure the safety of this customer's loan for banks - financial companies. main.
Currently, the insurance premium for loans ranges from 3-6% depending on each bank and credit institution. The premium rate is based on the loan disbursed.
For example: Customers who borrow 100 million at a bank with a loan insurance rate of 5%, the loan insurance is calculated according to the formula:
100,000,000 * 5% = 5,000,000 VND
The method of payment also varies from bank to bank. Some banks will directly deduct the insurance amount from the disbursement amount, which means that if you borrow 100 million customers, you will receive 95 million disbursed. But also, some credit institutions make the addition, meaning that the customer's loan at this time is 105 million, including 5 million in insurance, and the customer is disbursed in full 100 million.
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How much is customer loan insurance?
Loan insurance is being applied at 5-6% of the customer's disbursed amount.
For example: Customers applying for a loan of 20 million VND at the bank, the loan insurance amount is 5.5% x 20,000,000 = 1,100,000 VND
Loan insurance may be deducted from the disbursement amount or added to the loan agreement. For example:
- In case the customer does not receive the full loan amount: Customers who apply for a loan of 20 million VND will only receive 18.9 million VND (minus 1.1 million VND of loan insurance).
- In case the customer will receive the full 20 million dong and the bank will record the customer's loan amount as 21.1 million dong.
Find out what is the insurance amount?
Is loan insurance mandatory?
According to the regulations of the State Bank, loan insurance is not compulsory, customers can buy or not buy loan insurance. In other words, loan insurance is an agreement between a customer and a credit institution on a voluntary basis.
However, buying loan insurance brings many benefits to customers as well as helping the profile to have a higher credit score in the eyes of bank appraisal. Therefore, if possible, participate in loan insurance as an affirmation to the bank about its responsibility for the loan.
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Do mortgage loans buy loan insurance?
Mortgage insurance is simply the insurance that customers have to buy for their mortgage. However, the normal loan insurance package is not applied to mortgage loans but instead is a fire insurance product.
Then buying insurance Mortgage loan This is to ensure that in the event the mortgaged property loses its value, the insurance company will conduct an appraisal and pay the bank.
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Although loan insurance is not compulsory, if conditions permit, customers should join this insurance package because of the benefits it brings. Hope this article has brought you the most useful information.
Information edited by: banktop.vn