Loan Packing

Loan packing occurs when a lender adds ancillary products — such as credit insurance, extended warranties, gap insurance, or service contracts — to a loan without clearly explaining their nature, cost, or optionality. Borrowers may not realise they are paying for these additions, either because the products are buried in complex documentation, disclosed only verbally and hastily, or presented as mandatory requirements for loan approval when they are in fact optional.

Packed products inflate the loan principal, the monthly payment, and the total interest paid over the loan's life. In motor finance and consumer lending, packing has been a subject of regulatory action where commissions paid to dealers on ancillary products created incentives to bundle regardless of borrower need.

Borrowers should request an itemised breakdown of all charges and products included in any loan offer, ask explicitly whether each item is optional, and compare the Annual Percentage Rate (APR) rather than just the stated interest rate to capture all costs. Regulators in many jurisdictions require clear disclosure and consumer consent for add-on products.