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How are PPI claims calculated?

How are PPI claims calculated?

One of the most common questions we are asked is ‘how much compensation am I likely to receive?’.

Whilst the calculations are somewhat intricate, having to take into account interest rates, amount borrowed, dates interest and payments were posted etc. a calculation is basically broken down into three main parts.

Part 1 – How much you paid in premiums

This part of a compensation award is relatively simple to work out.

If your PPI was added to a loan, mortgage, car finance or hire purchase agreement you will have paid a set amount each month as part of your regular monthly payment.

If your PPI was added to a credit card, store card or overdraft you will have paid a varying amount each month as part of your monthly payment, dependent on what your balance was at the time.

Whatever you paid will be refunded.

Part 2 – The associated interest & charges

This is possibly the most technical part of the calculation.

Basically, as PPI was added to your balance it created an artificially higher balance than if it were not added in the first instance.

You would have therefore been charged interest on a balance that was higher than it should have been.

Calculations are required to refund the difference of what interest you did pay because of the PPI, and what interest you should have paid had PPI not been added.

Similarly, if the cost of the PPI premium being added to your balance caused you to receive default charges for going beyond your agreed credit limit these should also be refunded.

Part 3 – Compensatory interest

The final part of the award, and quite often a large slice dependent on how long ago you opened the credit agreement in question.

You are entitled to receive 8% compensatory interest, based on parts 1 & 2, from the time the credit agreement was opened up until the date compensation is due to be paid.

How are PPI claims calculated?

How are PPI claims calculated?