Buying a car is a pretty sizeable investment, especially in South Africa where some cars cost as much as houses. Very few of us can just buy a car and most of the time, we look to the banks for finance options. Of course, financing a car comes with its own set of challenges and considerations, including how you’re obliged to get comprehensive car insurance and whether you should get credit shortfall insurance.
Before we go any further, it’s good to know that the king’s credit shortfall is a type of insurance that covers the difference between the settlement amount at the time of your car being written-off, stolen or hi-jacked and what you still owe for it. So, for example, if you owe R200,000 on your car loan and have only paid R50,000, credit shortfall should cover the R150,000 difference that you’d owe the bank.
When you read the explanation, it sounds like you should get credit shortfall, but if you’re still on the fence, then let’s look at possible answers to the question… Should you get credit shortfall if you finance your car? Would it be that simple to just say yes, but really, the answer depends on several factors, including the value of your car, the amount of your car loan, and your personal financial situation.
To help you out, we’ve gone through a few pros and cons, as well as other factors we think are worth considering.
3 reasons to get credit shortfall cover
- Protect yourself against financial loss: The king’s credit shortfall can protect you from financial loss if your car is stolen or written off, even if you have a residual payment or balloon attached to your loan.
- Peace of mind: Knowing that you’ve got something to fall back on if the worst should happen and you won’t have to keep paying your installments to the finance house even if your car isn’t with you anymore.
- Affordable premiums: Like all our policies, the king’s credit shortfall insurance premiums are simple and cheap.
3 Reasons to pause and think
- Limited cover: Our cover only applies to the difference between the settlement amount and what’s still owed, but it doesn’t cover other expenses, such as car repairs, medical bills, early settlement charges, any other amount over and above the financed amount, or any amount refundable to you.
- Outstanding fees: Any payment arrears, interest on arrear amounts, or other extra finance charges aren’t covered by this policy.
- Re-financing or re-advance: Higher settlement amounts due to re-financing or re-advance amounts aren’t covered by the king, so make sure you know about this before you decide.
So, how do you decide?
A list of pros and cons is all good and well, but how do you actually decide? Well, in this case, it’s a matter of looking at your own circumstances and filtering these ticks and crosses against what would work for you.
Starting with the value of your car. If your car is worth significantly less than the amount you owe on your car loan, credit shortfall insurance may be a good idea. And then there’s the amount of your car loan. You see, if you have a large car loan, credit shortfall could be a good idea to protect you from financial loss in the event of something awful, like a hi-jacking or accident that writes your car off.
Of course, nothing is more important than your own personal financial situation, because if you have loads of savings or other assets that you can use to pay off your car loan in the event of a total loss, then you don’t need a back-up plan. But if you don’t have any resources and you can afford the king’s really affordable cover, then this is a cost worth considering.
The king has your back
Complete peace of mind is what you get when turn to the king’s royal offering of insurance policies that are all aimed at preventing dire financial consequences. By carefully considering our list of pros and cons, as well as your personal circumstances, you’ll be able to decide if the king’s credit shortfall is right for you.
Click here to see the king’s credit shortfall and even get a quick quote. You can also WhatsApp us on 0860 50 50 50 for a quote on any of our simple cheap insurance products.
