PAYMENTS
What new rules mean for cost limits of credit life insurance
Regulations prescribe the maximum monthly cost of credit life insurance on different types of credit agreements
Limits to the cost of credit life insurance, a mandatory part of credit agreements, came into effect this week, tightening regulatory loopholes exploited by margin-hungry lenders. The regulations, gazetted in February, prescribe the maximum monthly cost of credit life insurance on different types of credit agreements. The monthly cost per R1,000 of the deferred amount of credit ranges from R2 on mortgages to R4.50 on unsecured credit agreements. This would reduce credit life insurance payments to considerably lower levels, said Sasha Knott, CEO of Switch2, a company that helps borrowers save money on credit life insurance. The average cost of credit life insurance had previously been between R5 and R9 per R1,000, with some retailers charging as much as R57, said Knott.
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