With the summer months ahead, everyone is ready to get out and have some fun in the sun. Vehicles such as boats, RV’s, ATV’s, motorcycles and jet skis are making their way out onto the roads and into the water, and financial institutions are starting to see more and more loans coming over their desks. Due to the nature and use of these vehicles, the risk of physical damage is much greater, and financial institutions will be looking for ways to protect themselves from financial loss on the loans.
For many reasons, the Lender’s Single Interest (LSI) insurance has become a great option. This insurance protects lenders against financial loss from physical damage to property on which loans have been made, even if the borrower doesn’t have the specific required coverage or the vehicle has been repossessed. It extends blanket coverage over the lender’s existing loans and protects new loans going forward, so it is written to cover the lender’s entire vehicle portfolio. Also, the reporting is done on a monthly basis and is much more simplified.
One of the most attractive features of this type of insurance, however, is that the rate is calculated on a per new loan basis. Once the lender has completed the application and a rate has been determined, all that needs to be reported is the number of new loans generated each month. The fee is a one-time charge on new loans, and is based on the lender’s repossession history, portfolio delinquency, and average monthly loan volume. This per loan rate for LSI is usually very low compared to other loan types such as Collateral Protection Insurance (CPI).
Even better, in most states, this fee can be passed on to the borrower. Because the lender can charge a small premium up front, instead of through a forced-place premium on the backend, it is less likely for the borrower to default or be delinquent on the loan.
For more information on the benefits of LSI and how to calculate your PNL, contact us at 1.888.600.4436.