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Can you buy low deposit, or even no deposit, car insurance and pay for it monthly? Yes, it is possible.

Usually, if you have already been paying for your insurance in instalments, the insurer will allow you to continue doing so, without  necessarily asking for any up-front payment.  However, if you buy a new policy, from a new insurer, you will usually have to pay at least a little in advance, because if you do not that policy will be unenforceable; that is the way that contract law works. Some policies can be paid for in up to 12 instalments, the first payment being paid in advance by credit card. This way the insurance company get their down-payment, the policy is legal and you don't have to actually put your hand in your pocket to produce the money until your card payment is due.

How else can I get a policy with no pre-payment?

There are a couple of things worth trying.
  • A popular method is to put the initial payment, or even the whole cost, on a low-interest, or preferably no-interest, credit card. The bigger comparison sites (gocompare.com, confused.com, comparethemarket.com, moneysupermarket.com etc) offer a range of cards that you can apply for. You could then select whichever policy you found that suited your needs, rather than be forced into choosing from a narrow range of offers. Make sure, though, that you can afford to pay the bill off within the year, and meet all the repayments when they fall due. If you fall behind, and trigger penalty charges, this can turn out to be a very expensive mistake.
  • Have you tried asking your current insurer? If you've been a good customer, with no claims or convictions, they will not want to lose you. As an existing customer, they may be prepared to let you pay monthly, without anything in advance. Some of them may be prepared to match a price you've found by comparing quotations, as well as offer regular repayments, rather than see you move to a competitor. Ring their customer services department and ask. Remember, everything is negotiable!

If not: how much would I have to pay upfront?

The lowest one we've found this year is 10%. There are more insurers asking for 20% upwards, and some insurers don't offer easy terms at all - at least online. However, at renewal time some of these companies allow the full premium to be paid on credit. This could mean that although you would need to find a down payment now, you wouldn't need to in the future, provided that you stayed with the same insurer.

Can I pay by instalments if I have poor credit?

The only way to find out is to get some quotations. When you fill in a proposal form online, but don't want to pay the full premium in advance, a credit check is likely to be carried out. The insurer (or price comparison site owner) will have included the right to do this in the terms and conditions and you will have to accept these before quotations are delivered to you. Very few people ever read these.

If the checks reveal credit problems you may be charged a higher interest rate, or even be refused completely. If this happens you have the right to request that the company concerned provides you with the reasons why you were turned down so that you can have an opportunity to challenge the decision or get any incorrect information put right.

Different companies have different attitudes towards poor credit ratings so 'shopping around' may produce a better quotation.

It is worth remembering that these credit searches should only leave a 'soft' footprint on an applicant's credit record; this should only be visible to that applicant, and not to other companies. So, there should be no detrimental effects in making multiple price comparisons. However, once a policy is bought on 'easy terms' a hard record then appears on the buyer's credit file, so it is doubly important for that motorist to complete all payments in the agreed manner, or risk having a credit record which was even worse than before.

Does paying monthly cost more?

Not always; however most instalment plans involve charges and interest which, in 2017, worked out at about 11% on average. So, a policy of, say, £600, if paid upfront, would cost roughly £66 more if payments were spread over a year. However, we found that, very often, the insurance companies that charged the lowest basic premiums often charged higher down payments. This could mean that, in order to pay the smallest possible sum upfront, you could find that you didn't qualify for the lowest quote, which could force you to buy a more expensive policy.

What is the cheapest way of buying insurance, without a large down-payment?

If you compare quotes on a good price comparison site you may find that the cheapest quotes are from companies that don't advertise payment by installment. This doesn't always mean, though, that they rule this out completely. If you are a good, safe driver with a reasonable credit record they will want your business, so it is worth ringing them and telling the sales person that you would love to buy a policy from them if they will offer you reasonable terms. Sales staff often have a lot of leeway so you may well get a good pay-monthly offer after all.

If I pay monthly, will I still get the same benefits?

Usually: yes. However you need to check the policy documents carefully before buying any insurance, to be absolutely sure just what benefits you are buying, and which you are not. Most car insurance companies are getting financially squeezed these days so a lot of them have been tightening up on their benefits. For instance, it does not pay to assume that you will automatically get cover for any vehicle not belonging to you; this is an extra which is usually offered on some comprehensive policies only, and rarely, if ever, on third-party or third party fire and theft ones. Some policies allow for you to receive a courtesy car in the event of an accident, but quite a few specify that this will only be provided if they have one available; in other words it is not guaranteed! There is often a limit to how long you can use it for, and under which circumstances you would qualify for one. Often you won't be offered a temporary replacent car if your own is written off in an accident, rather that it being damaged but repairable!

And one of the worst drawbacks that many people never notice is the policy excess; whereas this used to be a nominal amount a lot of insurers now ask for an absolute minimum of £500 to be paid by yourself before they contribute towards a claim; the reasoning behind this is that if they are responsible for an accident many people will rather pay the costs themselves rather than pay out the excess, and then still face greatly inflated premiums in the future. Incidentally, if you have a 'protected no claims bonus' it isn't really worth the paper it's written on; if you make a claim the bonus will remain the same but the basic premium will still shoot up, meaning you'll pay a lot more anyhow!

So, to sum it all up, you may indeed get a policy without paying a lot right now, but as ever, you need to check the policy documents very carefully indeed before you commit yourself. Do bear in mind that once you have accepted a quotation you will have also accepted the insurance company's terms and conditions, and these will almost certainly include charges that they will make if you cancel the policy, or fail to meet all of the payments.




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