A new study has just caught my attention about how the UK public are overpaying for car insurance…all because they tick a box on the application.
What is this all about you might be wondering? Well, it has to do with ticking the box for paying your car insurance in monthly instalments, rather than paying the whole thing upfront.
Do You Enjoy Paying More? Probably Not
Most people think they are being clever by doing it monthly, but according to the survey, and many experts, the average motorist is actually paying 20% more.
This has a lot to do with the interest rates that car insurance companies put on to your monthly payments, because essentially they are “loaning you” the money and then you are paying them back.
The study found out that not a lot of people realise this is how it works, and most of the motorists they surveyed thought that by paying monthly they were paying the exact same amount as paying upfront.
Now you would think these car insurance companies would be offering low interest rates on your monthly instalments..after all, the car insurance market is very competitive and they really want you as a customer. It doesn’t appear that way though.
Car Insurance Companies Just Want to Profit
One of the most popular insurance companies currently charges an APR interest rate of 39.9%. This means that if your policy is £1000 a year then you will pay around £400 interest over the 12 months.
Not exactly cheap is it? That is why people are now being told to think twice about ticking that box for monthly instalments on their car insurance application form, and instead, paying all the money upfront.
Easier said than done you might be thinking, and I agree, because at the end of the day many of you just don’t have a few hundred (or thousand) quid hanging around in your bank account ready to pay for car insurance upfront.
The Tricks to Interest Free Car Insurance
However, there are a few tricks you can use. One example is borrowing money through a loan or credit card at a lower interest rate than what is being offered by the car insurance company. You then pay it all upfront and pay back the loan or credit card instead.
You can even find many 0% interest credit card offers out there right now, and if your credit score is reasonable you have a good chance of being accepted. Typically, the 0% interest lasts for a year or two, which means you can pay it off and not get charged any interest at all.
Just make sure that you make it a priority to pay off the credit card balance by making monthly payments, just like you would with the car insurance.