When consumers buy a car in the UK, on many occasions it is done with the aide of a finance agreement of some kind. Often this is done with a finance package through the motor dealer, with contract hire, hire purchase and personal contract purchase all popular choices. There are also many customers who arrange a bank loan through a direct lender, in order to provide the funds for the vehicle. So would the source of the funding effect your choice in terms of gap insurance cover on a personal bank loan?
Personal Loans and Gap Insurance
The choice of Gap Insurance for vehicles on ‘dealer finance’ and through a personal loan is actually slightly different, and this is because of one particular aspect. A personal loan is not linked to the vehicle in any way, other than you have used the money from it to pay for the vehicle. If the vehicle is ‘written off’ you do not have to pay off the personal loan because it is not linked.
With ‘dealer finance’ the role is reversed. Any loan linked to the vehicle must be paid and settled if the vehicle is ‘written off’ in an accident or is stolen.
Because of this difference, if you buy your motor vehicle by funding through a bank loan, which is not attached to the vehicle, then in Gap Insurance terms it can be considered that you are paying cash for the vehicle. In this respect you may discount the option of Finance Gap Insurance as this type of cover can only be used against a finance settlement tied to the vehicle.
Which Gap Insurance for a Personal Loan?
As a personal loan would be considered a cash payment then the options of Return to Invoice and Vehicle Replacement Insurance would be the normal options. Remember also if the vehicle is ‘written off’ then you do not have to settle your personal loan if you do not want to.
So the choice of Gap Insurance for a personal loan is slightly less than for dealer finance, which is possibly one consideration for your choice of funding.