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Credit insurance: what is it for?

What is a credit insurance exactly? Actually, this term covers two distinct products concerning two categories of services. A credit insurance related to a personal loan has indeed nothing to do with a credit insurance linked to a factoring solution for SME. Our explanation.

Credit insurance

A matter of definition

The term credit insurance is a particular one. Indeed, it can refer to two different products. The first product is related to personal loans, as the second one is a specific service included in factoring solutions for SME.

Personal loan

When talking about a private credit, namely a loan granted by a bank or financial institution to a private person, a credit insurance is an protection that covers the monthly repayment of the loan in case of death, illness, unemployment, … There are two types of coverage:

  • Mandatory credit insurance: this is a coverage in case of death. It is included in every contrat, and its cost is included in the interest.
  • Non-mandatory credit insurance: this coverage protects in case of illness, disability, or unemployment. It leads to an extra cost for the customer.

For more information about this type of product, Creditloan offers a full guide for credit insurances.

Factoring

Factoring is a solution for small and medium businesses. Its purpose is to offer a protection against non-payment risks. This product is generally divided into 3 services:

  • The factoring solution itself
  • Assignment
  • Credit insurance

In that case, a credit insurance represents a range of services destined to externalize a certain number of credit management issues. It includes risk analysis and monitoring, and offers indemnification in case a claim occurs.