What is credit insurance? Credit insurance covers the amount due on a loan if you cannot pay. It’s one of many ways lenders can make loans affordable for borrowers. The borrower typically pays the premium for this protection, which means you will pay more interest if you get it.
1- Use it to get rid of other types of debt
You’re already paying back high-interest rates on your cards; shouldn’t you take care these balances are covered? If the cost is relatively low and doesn’t add too much to your APR, it may be worth getting just enough credit life insurance to cover those balances, especially if they carry a high rate. When your card company does declare you in default, the balance you owe will already be covered.
2 – Use it to cover an outstanding loan and credit cards
If you have low monthly payments on one or two items, like loans and even some credit cards, but high minimums on others, adding enough insurance to pay off those other bills in case of accident or death could be worth considering to lower that high minimum rate (the cost is often wrapped into the finance charge). However, remember that if you add extra insurance like this then cancel another policy – for example, your life insurance – you could lose some of the benefits of that policy.
3 – Use it as an excuse not to pay off debt
If you have more than one loan or credit card, then paying on them all at once every month is hard enough; paying down different balances with different rates can feel impossible if each balance has its minimum monthly payment. Adding insurance coverage on some of your lower interest accounts may help lower those payments, so they are less daunting, which means if anyone’s account goes into default, you won’t feel as much of a loss.
4 – Use it as a part-insurance, part-forced savings plan
This type of credit insurance can be very good for those who find themselves in trouble because they don’t have a budget well enough and pay just the minimums each month. If your premium is less than your monthly payment toward debt, then buying coverage will help to force yourself to save and pay off those debts faster by paying extra every month to make up for what you’re paying to insure your debt.
5 – Use it to pay off low-interest debt
If you have good credit and can qualify for very low-interest rates at 0% or lower on your credit cards, then using insurance to quickly pay them off is worth considering. Since there are no minimums involved in this type of credit card repayment plan, use the extra money that would go toward premiums every month to make even more headway on those cards.
6 – Use it to pay down expensive debt
If you have high-interest loans or credit cards, buying enough insurance to cover them can be a good idea. While you’ll increase monthly bills by adding insurance, the policy will help out with higher interest payments, so they don’t become overwhelming if something happens to your earning ability or your life. (https://atradius.no)
Using credit insurance to match your life and needs is a great option for those who want to be financially prepared for the unexpected. When you know how this type of coverage can be helpful, it’s easier to make sure you buy enough or even none at all when making decisions about your accounts.