What is a Tied Product?
A tied product is a financial product or investment that is offered in conjunction with a loan. It is a type of loan where the lender requires the borrower to purchase a related product from them at the same time. The product is usually an insurance product such as life insurance, health insurance, or mortgage protection insurance. The product is “tied” to the loan because the borrower cannot take out the loan without also purchasing the related product.
Benefits of Tied Products
Tied products offer several advantages to lenders, borrowers, and the economy. For lenders, they provide a steady stream of income from the sale of the related product. For borrowers, they can provide a convenient way to obtain loan financing and insurance protection at the same time. And for the economy, the increased demand for financial products and services can help to create jobs and stimulate economic growth.
Examples of Tied Products
Some examples of tied products include:
- Mortgage protection insurance: This is a type of insurance that pays off the balance of a mortgage in the event of the borrower’s death or disability.
- Credit life insurance: This is a type of insurance that pays off the balance of a loan if the borrower dies during the loan’s term.
- Vehicle service contracts: This is an agreement that provides coverage for repairs and maintenance of a vehicle purchased with a loan.
- Home warranty: This is a type of insurance that covers repairs and replacements of household appliances and systems.
Conclusion
Tied products can be a convenient and cost-effective way to obtain loan financing and insurance protection. They offer benefits to lenders, borrowers, and the economy. It is important to understand the terms and conditions of any tied product before signing up for one. For more information about tied products, please visit: