PPI decision could lead to higher-rate personal loans

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PPI decision could lead to higher-rate personal loans

The interest rates on personal loans could increase as a result of the recent decision to block payment protection insurance (PPI) from being sold at the point of sale, a finance expert has suggested.

David Kuo, director of the Motley Fool, suggested that it is widely accepted that lenders do not make any significant amount of money from the interest on loans and it is the sale of PPI that is profitable.

But the banks can no longer sell PPI - except retail PPI - at the point of sale, after the Competition Commission introduced a ban in an attempt to help consumers become aware of the different options available to them before they sign up.

Mr Kuo remarked: "What it [the ban] really means is that when they clamp down on the sale of PPI, the banks will have to find some other way in which they can start making money."

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