The hiring of life insurance is usually a condition of the banks to grant you financing. Both personal loans and mortgages, you are requested to take out insurance to protect yourself in the event of your death or permanent disability.
But is it mandatory to take out this life insurance on personal loans? Can we refuse and ask for a personal loan without life insurance or a person who guarantees you?
Is it mandatory to take out life insurance on personal loans?
The answer is clear, no. By law, banks cannot force you to take out life insurance with a personal loan, although they are allowed to make a reduction in the interest rate in exchange for you to take out the insurance.
In this way, banks increase the sales of the insurance they have among their products and also grant you the loan. Is this legal? Today yes. It is a procedure similar to when the bank gives you an item in exchange for you to pay the payroll with them.
What happens if we do not take out life insurance on personal loans?
If we do accounts, we may not be interested in contracting life insurance in exchange for the reduction in the interest rate. In that case, we will consider rejecting the life insurance offered by the bank when requesting a personal loan. These are the two most likely consequences:
Find the best life insurance We compare hundreds of life insurance to offer you the best Discover your life insurance
The interest rate of the loan will increase
Banks cannot force you to take out life insurance to grant you a loan. However, as with mortgages, the main banks sell what is known as the Bonus Loan. The subsidized loan is one in which the interest rate is reduced by contracting other products offered by the bank, in this case, it is usually life insurance or payment protection insurance.
In the case of not contracting the associated product, this will mean that the interest rate of the loan will increase. It will be the client who takes stock of whether he is more interested in contracting life insurance with an annual payment that can vary from $ 200-400 per year depending on your profile or waive the bonus on the interest rate.
An example is the E-Money Now You Loan. This loan is based on a fixed interest rate of 4.95% annual nominal and APR 5.95% for the entire term. In the case of not contracting life insurance, the interest rate will increase by 0.50%.
The bank may not grant you the loan
As we have said, banks cannot force you to hire any additional product to grant you the loan. But what they can do is not grant you the loan, directly.
Each bank has a risk analysis department with its own method, so if the bank determines that you are not a “solvent” customer or the repayment of the loan is not guaranteed, it will force you to provide a guarantee or life insurance. If you are not willing to do so, the bank will rule that you are not eligible for this loan.