Pay monthly

Paying for your car insurance is a big commitment! If you're considering monthly repayments, it's important to understand how they work. While they can make it easier to manage your budget, they usually end up costing more than a one-off, yearly payment.

In this guide, we'll cover everything you need to know about paying for car insurance monthly. So, you can decide if it's the right choice for you. Let's jump in.

Can you pay for car insurance monthly?

Yes, you can!

Most insurers offer flexible payment options, allowing you to pay either annually in one lump sum or in monthly installments.

Paying for your car insurance monthly is great for helping to spread the cost over the year. But, it usually works out more expensive because of added interest. Your credit score can also impact your chances of being approved for a monthly plan and can affect how much you pay.

How much does it cost to pay for car insurance monthly?

Generally speaking, the cost usually depends on your personal circumstances and the level of cover you're looking for.

Here's a closer look at how insurers work out the cost of monthly repayments:

How do insurers calculate monthly car insurance repayments?

Each insurer does things slightly differently, but here's the usual process:

• Your insurer will calculate the annual cost of your policy.
• They'll then add interest on top of that, since paying monthly is considered a credit agreement.
• The total amount will be split into monthly instalments.

How can I get cheaper pay monthly car insurance?

Looking to save some money? Consider giving the following a try:

• Add a named driver. Are you a younger driver? If you are, adding a more experienced driver to your policy could lower the cost.
• Opt for fully comprehensive cover. Comprehensive car insurance often works out cheaper than other kinds of insurance, likethird party cover.
• Increase your car's security. Investing in things like insurer-approved alarms can help to lower the cost of your premium.
• Compare different quotes. Shopping around can help you find the best deal. When you get a quote, we'll show you a range of options to choose from.

Advantages of monthly car insurance repayments

Paying monthly could be ideal because:

• It can make it easier to pay for car insurance. With monthly repayments, you can spread the cost of your total car insurance cost over 12 months.
• It can help to improve your credit rating. If you keep on top of your repayments, you could see your credit score begin to creep up. Hooray.
• It can be ideal for budgeting. Knowing that you'll have a set amount to pay each month can make it easier to budget over the year.

Disadvantages of paying monthly?

There's a few drawbacks of paying monthly worth keeping in mind:

• It usually costs more. The cost of opting for a monthly agreement will be the price of an annual policy plus interest—usually anywhere between 10-20%.
• You'll probably have a hard credit check. Insurers will do this to get an idea of your lending reliability.
• Missed or late repayments can lower your credit score. If you can't make your monthly repayments, you could find that your credit score goes down.

Does paying car insurance monthly build credit in the UK?

Yes, it can help.

Like we've mentioned, paying for car insurance monthly is essentially a credit agreement with your insurer. So, by making your repayments on time, you could see a boost to your credit score over time. Great news!

There's a flip side, though. Missed repayments can have the opposite effect and potentially lower your score. They might be reported to credit agencies, so make sure the monthly cost is manageable before committing.

And, if your financial situation changes, don't panic—just let your insurer know as soon as possible. They may be able to offer alternative repayment options. For example, a revised payment plan or policy adjustments to lower your premium while you get back on track.

Will I be credit checked if I pay monthly?

Yes, insurers will perform a hard credit check if you apply for a monthly repayment agreement.

If you don't have a good credit history, insurers might not agree to insure you. Or, they might agree to insure you but view you as higher risk, which could mean a more expensive premium.

What are the alternatives to pay monthly car insurance?

Monthly car insurance repayments not right for you? You have other options to pay for car insurance:

• Annual car insurance. This means paying for your entire policy upfront in one lump sum. It's often the cheapest option overall since you avoid interest charges.
• Temporary car insurance. Only drive now and then? A temporary policy could suit you. It can cover you anywhere from 1 hour to 28 days. Just keep in mind, if you own the car and won't be using it for a while, you'll need a  Statutory Off Road Notification (SORN). And, if your car is parked on a public road, you must have insurance, even if you're not driving it.
• Pay as you go car insurance.This option lets you pay based on how many miles you drive. If you're not on the road often, this could be a more cost-effective alternative to a traditional policy.

Do I have to pay a deposit with pay monthly car insurance?

In a way, yes. Here's how it works:

When you choose to pay monthly, most insurers require an initial larger payment to kickstart the policy. Usually, there's an additional 10-20% of your total policy cost bundled into the payment. After that, the remaining balance is equally spread over the rest of the term.

But, some insurers evenly split the total cost across 12 months instead. In that case, you wouldn't need to pay more upfront, but your monthly repayments would be slightly higher. Either way, the total amount you pay to your insurer overall will be the same.

Does the car insurance deposit cover the first month?

Yes. If your first payment includes 10-20% of the policy price on top, you're essentially paying for the first month of your car insurance. The amount remaining will then be spread across the remaining months.

Why is interest added to monthly car insurance repayments?

Interest is added to monthly car insurance repayments because it's considered a credit agreement.

Instead of paying the full amount upfront, you're spreading the cost over the year. Because of this, insurers often charge interest to cover the costs of processing your monthly repayments. This is why paying annually can sometimes be cheaper overall—you avoid the added interest.

What happens if I miss a payment?

If you're paying for your insurance monthly by direct debit and there isn't enough money in your account, the payment will bounce. But, you won't be out of time just yet—banks will usually try to process failed payments twice more on the same day. Once in the morning and again in the afternoon at 2pm. This gives you a chance to transfer funds if needed.

If the payment still doesn't go through, you'll be in breach of your credit agreement. At this point, you'll likely receive a Notice of Default—a formal warning via email, post, or both. This means your insurer may inform credit reference agencies, which could result in a 'default' being added to your credit file. A default happens when a lender closes your account due to missed repayments, which can then negatively affect your credit score.

The good news? You'll usually have a grace period to catch up. Your insurer will let you know when they'll attempt the payment again, which is usually within a few working days. If you'd rather take care of it sooner, you can contact customer service to process the payment manually.

One last thing: Every insurer handles missed repayments a little differently. It's always a good idea to check your policy documents so you know exactly what to expect.