Payment protection insurance (PPI), which covers your loan or mortgage repayments if you fall ill or lose your job, has come under fire for being too expensive and too aggressively marketed. Providers therefore are looking at making this product more attractive to consumers.

The latest deal on PPI comes in the form of a cashback loan. Nationwide is offering “loancare cashback” – a refund on a proportion of the cost of payment protection insurance – if you take out a loan before the end of November. Moneyback Bank also refunds some of the insurance premium if you meet certain criteria.

Getting money back for taking out a loan may sound like a good deal, but it could cost you more in the long run. The insurance on these loans can be more expensive than on non-cashback deals. Also, to qualify for cashback you cannot claim on your insurance and you must not miss a loan repayment nor pay off the loan early.

Nationwide’s “loancare cashback” offers a 20 per cent refund on the cost of insurance, which is paid out at the end of the loan term. Say you borrow £5,000 from Nationwide at a rate of 7.8 per cent over three years. At the end of the term your total repayments would be £6,286.68, which includes £684.72 of insurance cover. You would receive a refund of £122.21 – 20 per cent of the insurance premium, excluding interest.

Moneyback Bank refunds a fixed annual amount depending on the size of the loan. For a loan of £3,000-£5,000 you receive £10 back a year. This rises to £40 if you borrow £15,001-£20,000.

However Moneyback’s insurance premium is fairly expensive. According to, the comparison service, if you take a three-year £5,000 loan from Moneyback at a rate of 5.6 per cent, you will clock up £756 in insurance premiums.

Better deals can be found elsewhere. Moneyfacts says Northern Rock offers a £5,000 loan at a rate of 5.7 per cent. The total insurance on this would be £508.68, around £220 cheaper than Moneyback and more than £50 cheaper than Nationwide even after any cashback.

Also, independent providers such as and may insure your loan repayments for less.

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