It is likely that if you have gone to your financial institution for a lifetime to apply for a loan (either personal or mortgage) you have been obliged to take out life insurance . However, is this a mandatory or even legal requirement? The truth is that the answer to both questions is a resounding NO. From Particular Credit we explain it to you.
Life insurance and loans
Although many banks will try to sell you otherwise, the truth is that by law they cannot force you to take out life insurance when you apply for a loan. Another thing is that they offer you more interesting conditions if you do. For example reduce the interest rate. This second option is legal today. Since it is an advertising claim to sell two products in pack and in theory at a better price than separate.
Consequences of not contracting life insurance when requesting a loan from a bank
Unfortunately, refusing to hire this service has direct repercussions on the financial product that you do want to acquire. That is, the loan. In general there are two possible scenarios that can occur:
That the interest rate increases
Although, as we explained at the beginning by Law, they cannot force you to take out life insurance when applying for a loan, they can raise the interest rate. This is because it is a bonus loan. What does this mean? That you only get a reduction in interest if you hire other products associated with the loan. These can be from life insurance to one of payment protection.
As a general rule, acceptance of the payment of one of these linked products usually involves an annual cost of between € 200 and € 400. Hence it is interesting to make numbers to see if it really fits us. You also have to check with a thousand eyes the linked product they sell you because in many cases they have virtually no coverage or are useful for the customer.
Let us directly deny the loan
Although by law they cannot force you to take out life insurance when you apply for a loan, they do have your right to refuse it if you do not. This “mandatory” will be closely linked to the client’s financial file. In this way, the less solvent the future borrower considers, the greater the requirements for granting a loan. In these cases, presenting a guarantee or contracting life insurance is a method for the bank to minimize the risks. And to make sure that you will end up paying back the borrowed amount. If you do not fall within your plans to accept these requirements and do not consider your profile sufficiently suitable, they will directly deny you the credit.
Factors that can determine that a bank grants us a loan without contracting life insurance
However, there are certain factors that will help us achieve our goal: to contract a loan without related products.
Have a good credit history
If our credit history is adequate and we show that we have sufficient financial solvency to return the money, it is likely that the bank will grant us the loan without the need to take out life insurance and with a good interest rate.
Degree of relationship with the bank
If we are clients of a lifetime and we have a high degree of relationship with the bank to which we have requested a loan, it is likely that in this case they do not require us to contract any type of insurance.
Open rune checking account and direct payroll
Nowadays, banks due to the high level of competitiveness that the loan sector has acquired are starting to offer this product without forcing others to acquire it. Not surprisingly, private equity companies have become tough opponents for them.
Currently many banks grant credit as long as the client opens or has a checking account with them and domiciles their payroll there.