In case of job loss or disability, certain credit cards and lenders provide payment protection plans that enable you to temporarily halt payments.
There are times when life tosses a curve ball at us and we can't pay our debts on time. In the event of an emergency, such as a job loss or disability, certain credit cards and lenders provide payment protection plans that enable you to temporarily halt payments. However, be aware of the possible drawbacks before signing up for one.
Before enrolling in a payment protection plan, prospective customers should familiarise themselves with the terms and conditions, eligibility requirements, and restrictions. The last thing you need is to be paying for insurance every month just to find out that it doesn't cover a certain circumstance when you need it. To read the fine print, you'll need to consult the payment protection plan agreement and disclosures, which should be available on the lender or creditor's website.
So what is a protection plan?
It’s essentially a payment break in the event of unforeseen income loss. Customers are charged a modest, recurring monthly cost which is determined by the amount borrowed and the conditions covered.
What should you look out for?
Some consumers benefit from payment protection programs, but they're not right for everyone. Before you join up for one, consider the following:
Conditions and exclusions are common in payment plans. To give you an example, it might not be accessible for the precise hardship you are looking for protection from. If you lose government benefits like SASSA grants or pensions, payment protection plans may not be able to help you.
If you don't pay for the additional protection, you won't be able to reap the benefits of the plan. As a result, it's possible that you'll find yourself paying for this service and never actually requiring or qualifying for it.
You may be better off with a combination of disability and life insurance to meet your financial goals and objectives.
Some requirements stated by your issuer or lender must be met in order for you to be eligible for a payment protection plan. You may need a few months of work experience to qualify, or you may not be protected for job loss if you are self-employed, work for a family member and have seasonal work, or if your hours were cut. You may also be denied coverage if your disability occurred too recently in relation to the date your plan would begin to pay benefits. For example, you may be required to provide proof of your disability, job loss, or other issue. Finally, it's critical to be aware of any benefit limits, such as how long they are valid for.
When it comes to using your benefits, each creditor or lender has a separate set of rules for whether specific situations are valid as a qualifying circumstance.
Consider your options
There are actions you may take to reduce the financial and credit impact of missing a payment when you're in a pinch. If you're having trouble paying your minimum payments, don't hesitate to contact your lenders. They may be able to help you.
Concentrate on accumulating an emergency fund. This will assist you in anticipating the unexpected and reducing the financial harm it may create. You should have enough money in your emergency fund to cover at least a few months' worth of costs until you can get back on your feet.
Take into account disability and life insurance. These financial products are designed to assist you or your family in the event of an accident, medical incapacity, or death. While insurance can be more expensive than a payment protection plan, it provides safety that extends beyond simply paying the debt on your credit card or loan. It may also be more dependable and accessible.