• Second chance credit and high interest rates: What’s the impact on your car insurance?

    5 December 2018Christopher Johnson

    Job loss, unemployment, big debts, professional burnout… No one is immune to life crises and the financial difficulties that often go with them. Since a car is often an essential tool, contracting a loan with second or third chance credit services – and the higher interest rates that go with it – can be tempting if you have been refused a standard car loan. Did you know, however, that dealing with a substandard creditor could impact your car insurance premium? In this article, Assurances Multi-Risques will attempt to explain why your insurance premium will go up if you contract a high-interest loan, and why some insurers could refuse to cover your car.

     

    A 2nd chance? Not with your car insurer!

    Financial woes have forced you to contract a high-interest loan in order to buy the car you so badly need to get around, and, as a last formality before driving off in your new car, you have contacted your insurer to obtain the required car coverage… When you gave him the name of your creditor or lender, however, he refused to cover you because of the high interest rate you are paying. Indeed, if your interest rate is over 10%, a regular insurer has the right to deny you insurance coverage.

     

    Please do not panic! Contact an independent insurance broker specialized in high-interest loans and substandard creditors. Few insurers agree to cover customers who have resorted to second or third chance credit services, but Assurances Multi-Risques brokers will always make sure to help you to find the best insurance coverage at the best possible price.

     

    Why is insurance coverage denied in such cases?

    Liability insurance coverage is based on statistics such as the number of claims, the cost of claims, the driver’s sex and age, and, as you may already have guessed, the customer’s credit rating! Cumulative data has shown that people whose credit rating is lower than average tend to make more claims than people with higher credit ratings… That is the reason why some insurers refuse coverage to second chance credit clients. Indeed, when a consumer buys or leases a vehicle using second or third chance credit services, he is usually trying to improve a less than impeccable credit rating, and insurers are often hesitant to deal with such clients. The same goes for clients who have declared bankruptcy.

     

    With slogans such as “Second chance credit” or “No credit refused”, substandard creditors pose as saviors, but as you now know, this solution not only spells exorbitant credit rates, but also potential insurance problems. We, at Assurances Multi-Risques, understand that you may have no other choice but to resort to second chance credit in order to obtain the car you so badly need. We urge you, however, to contact an independent insurance broker specialized in substandard car insurance before you finalize your purchase. By doing this, you will avoid unpleasant surprises and getting even deeper into debt.