- 03
- Oct
This month over a million new cars will be sold bearing the new ‘56 numberplate but drivers are in danger of paying a high penalty on their insurance premiums warns MoneyExpert.com.
MoneyExpert.com have calculated the costs of drivers choosing to pay their insurance premiums by direct debit and the results are not pretty!
“Motor insurance is expensive and opting to pay by direct debit is a popular way to spread the cost,” says Sean Gardner, chief executive of MoneyExpert.com. “However, this comes at a cost - insurers argue they are making a loan to customers if they let them pay in this way.”
It seems that insurance companies are loading direct debit premiums with charges amounting to 21.5% APR on average, effectively wiping out any benefit that car buyers have gained by bartering on the forecourt.
Insurers defend their premium-loading action by claiming that this covers them for essentially ‘loaning’ the full premium amount to car drivers, but the small print says otherwise. They assert that drivers are increasing insurance companies’ risk by not paying the full amount up front but any driver defaulting on their direct debits will soon find their policy cancelled and cover withdrawn.
“Insurers have a reputation for being moneygrabbing and slow to pay out,” says Abbi Rouse of Interfinancial, the online loan brokers. “This is just another way of milking consumers, particularly those who are unable to pay the full amount before cover commences.”
With direct debit costs typically adding hundreds of pounds to an annual policy, car drivers would be wise to shop around for cover. Only 17 fully comprehensive motor insurance policies charge under 15 per cent APR for their Direct Debit payment option, leaving many charging more than the average credit card.
For car drivers who are planning on taking out a secured personal loan to fund their car purchase, including lump-sum insurance in the amount borrowed can save hundreds of pounds a year in unwanted interest payments.
“A typical personal loan is currently about 9.9% through us,” says Rouse. “By arranging to buy your car with a secured loan you benefit in many ways. Firstly, you are effectively a cash buyer when you reach the forecourt, enabling you to haggle over the price. And secondly, you can pay your insurance up front, avoiding direct debit penalties.”
Interfinancial offer great-rate personal loans, both secured and unsecured. If you are interested in secured personal loans with bad credit or unsecured tenant loans with poor credit history we are also able to help.
