Is it normal for a finance company to charge an insurance fee if approved for a secured loan?
- Margarita DLv 610 years agoFavorite Answer
If the finance company you are asking about is a premium finance company and the security for the loan is an insurance policy, then it is normal for there to be a fee included in the cost of financing which is usually included in the annual percentage calculations.
If you are talking about other types of loans such as a mortgage secured by real property, I have seen insurance fees usually done by high risk lenders. Obviously these types of loans usually have very high interest rates and other questionable charges.
The only other insurance charges I have seen on loans are things like PMI (Private Mortgage Insurance--find information on this website http://www.frbsf.org/publications/consumer/pmi.htm... ) or FHA (which includes 203 (b) mortgage insurance--find information on this website http://www.hud.gov/offices/hsg/sfh/ins/sfh203b.cfm ) which is totally legitimate.
Of course in most secured loan contracts, whether it is secured by a home, automobile or some other property, the lender will usually require that you maintain insurance on the property and if you fail to maintain it, they usually include a provision where they can purchase the insurance and add the cost plus interest to your loan. This practice is known as forced placed coverage and is usually extremely expensive and never in the best interests of the borrower.
If this does not answer your question, then you need to post additional details. Good LuckSource(s): Certified Insurance Counselor, Licensed Insurance Agent & Broker for over 29 years.
- Wayne ZLv 710 years ago
Some finance companies try and sell you optional insurance but it is added to your monthly payment.
If this company is requesting that you pay them the cash upfront, they are a SCAM. There is no loan and they are trying to scam you out of your money.
- Go with the flowLv 710 years ago
Not with a secured loan.
Who the heck are you dealing with?