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Nobody knows what the future holds, and this is why many consumers that take out loans want to ensure that they have payment protection, so that should anything untoward happen they or their loved ones and not lumbered with an unmanageable debt to repay. There are some good deals available on insurance for those that shop around, but many people get duped into taking out insurance through the lender with which they take out the loans, which is often works out far more expensive.

Experts from Moneyfacts have now started warning consumers about a new tactic that is being used by some lenders in order to tempt consumers to take out their protection insurance rather than to shop around and look for the best deal. A number of lenders are now offering cash back on loans, where the borrower receives a stipulated amount or percentage as a lump sum upon completion of the loans.

Although this can sound like a really tempting offer for those looking for a personal loans, because it means that they will have a little extra cash in their pockets, Moneyfacts has warned that over the longer term it could end up costing the consumer far more. This is because part of the conditions set down by some of these lenders is that the consumer takes out protection insurance with them in order to qualify for the cash back offer.

One finance analyst from Moneyfacts stated: “ While the prospect of a cash payment from your loan provider may sound attractive, over the term of the loan, better deals can be found.” She added: “Opting for a loan with Northern Rock, currently offering a best buy rate of 5.7 per cent you could save £ 214.03 over the Nationwide BS loan, even when taking the promotional cash back offer into account.”

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