The Pros And Cons Of Paying Monthly For Your Car Insurance

When it comes to paying your car insurance premiums you tend to have two choices in terms of how often you make those payments. If you want to, you can pay annually or you can choose to make payments monthly usually by direct debit.

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How do you pay for your car insurance?

An increasing number of people tend to pay monthly for the simple reason that they cannot afford to pay a full year’s premium all in one go. Such is the financial situation of many people here in the UK that funds are so tight they cannot pay out several hundred pounds in one go to cover the next twelve months premiums.

In some respects, this is a shame because by paying annually they would almost certainly have saved money. Why is this? Well, when electing to pay monthly, most car insurance providers add interest to the premium on the basis that, to all intents and purposes, you are borrowing the money from the car insurer to pay the annual premium and repaying them over 12 months. You may wish to look at your insurance quote to see just what interest rate they are charging and how much interest this comes to – you may be surprised how high it is!

However, there are many people including the writer of this post, who would rather pay monthly by direct debit, as they do with most of their regular bills, as it is so much more manageable to budget in this way. After all, it is easier to have the funds available on a regular basis rather than be faced with receiving your renewal notice and having to pay many hundreds of pounds all in one go. In fact, unless those monies are put in something like a savings account each month to be used towards paying for the car insurance once a year, it is quite likely that they will get spent on something else.

Hopefully, for those that were unaware of the financial implications of paying monthly, the situation is a little clearer.