No change to credit life insurance cost
Despite new changes made to the National Credit Act, there is no change in the rules about credit life insurance. New changes became law in mid-March 2015, but there is still no limit to the amount that companies can charge for credit life insurance.
Credit life insurance is usually attached to a loan and many creditors require it. The insurance is then used to pay off the loan should anything happen to the person who borrowed the money. However, some less reputable creditors use this as a way to make more profit by charging as much as R56 per R1000 borrowed.
The proposed change to the National Credit Act would have limited the amount of credit life insurance to just R4 per R1000 borrowed.
Unfortunately, there's not much that consumers can do about these charges, other than being aware that they exist and carefully comparing loan offers to see how much credit life insurance is being charged. However, if you're under debt review (in the process of legally consolidating your debts with a recognised debt counselling service) you may cancel the credit life insurance provided by a bank and opt for a cheaper, private company instead.
A limit on the charges for credit life insurance would certainly have made life easier for those looking to get a loan. In the meantime though, shop carefully if you're planning to borrow money!
Another disappointing lack of change in the National Credit Act amendments was that smaller creditors are still not required to register with the regulator. Registration is only required when a creditor gives over 100 loans or lends over R500 000 per year. This, of course, leaves the door open for those more unscrupulous companies to do as they wish, including charging high credit life insurance…
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