Should I Pay my Insurance in Instalments?

Should I Pay my Insurance in Instalments?


When you take out insurance then you may have the option to either pay a yearly amount on a lump sum or pay it in monthly instalments. It is worth understanding more about each of the options so that you can pick the best one.

Monthly Instalments

Paying something in instalments means that it is easier to manage. You will not have to find a lump sum of money to pay for it all at once but you will be able to spread the payments over a year. This means that you will just have to find a small amount each month rather than trying to find the money to pay it all. This can be a great thing to do as long as there is no charge for it. However, with most insurance companies there will be an interest charge. It is worth checking to see if there is one and how much it will be.

Once you know the charge you can calculate how much extra you will pay as a result of paying in instalments. Then you will be able to decide whether you think that it will be worth. Obviously spreading the payments can be easier and you may think that you would be happy to pay more for this. It might be that you would rather not pay extra, but you have no choice as you cannot afford the lump sum.

Lump Sum

Finding a lump sum of money is not always easy. This will depend on what your financial situation is like and how big the lump sum of money is. Some people will be able to manage it easily and will like the fact that the bill is paid and can be forgotten for the year. However, if there is the option to pay in instalments and no interest is charged (so it is the same price as paying in a lump sum) then it makes sense to pay the instalments. This is because you can hold onto the rest of your money and put it in a savings account and earn interest on it.

Which is Best?

It can be cheaper most of the time to pay in a lump sum rather than instalments. This means that it would seem to make sense that this was the best option. However, if the price is the same, then it could make sense to pay in instalments. However, on a personal level you may have different ideas about what you think is best. You may not be able to afford a lump sum or you may rather pay the lump sum, even if it is no dearer to pay in instalments, so that you can get the bill paid. Some people would rather just get it done so that they do not have to worry about it.

Future Planning

If you wish that you had enough money to pay a lump sum but you do not, then it can be worth planning better for next time. It is likely that you will have to renew the insurance in a years’ time and so you will have some time to save up towards paying it in a lump sum next time. This could be tricky as you will also be paying the monthly instalments but it will not be impossible. You will need to calculate how much you need to save (bearing in mind that premiums tend to go up year on year) and try to put that much aside each month so that you have enough to pay the premium in a lump sum next time. This will take self-discipline and determination. You will need to cut back on your spending in other areas in order to do it and you will need to make sure that you do not dig into those savings and spend them on something else. It is worth having a written reminder as to why you are saving the money so that you can use it to motivate yourself when you feel that you wish had more money to spend on other things. It will help you to remember your goal. You will only have this problem for a year, as once you have paid one lump sum, the second year you will just have to save up towards the following year and will not have to pay the instalments of insurance as well. You may want to do this with a selection of different insurance products and it may be that you need to start with one for one year and then pick another the following year. It will take time but in the run you will have a system where you will be able to save a significant amount of money. It will be hard to start with but worth it in the end.

Where to go for a Car Loan

Where to go for a Car Loan

If you are looking to buy a new car and need to borrow the money to do so then you may be wondering where to go for a loan. Many people will choose the loan form the dealer, but there are other options and it is worth thinking about them before making the decision. It could save you a great deal of money.  

Loan from dealer

If you get the loan form the dealer then it could be more convenient. They will organise it with you when you are sorting all the paperwork to buy the car. This means that you will not have to contact more than one company. They may also offer you a discount if you take the loan with them and some even offer interest free credit on their loans.

However, sometimes loans from dealers can be more expensive. Make sure that you calculate exactly how much you will be expecting to repay and compare that with other options. Ensure you look at the interest and the set-up costs. These can be hidden unless you compare the AER’s and so you may think you are getting a better deal than you actually are.

Loan from bank

You may be able to get a car loan form a bank or take out a personal loan and use it to pay for the car. This could possibly be cheaper than a loan from the car dealers and so it is well worth considering one. It is good to do some research to find out what the loans cost. Do remember that when you are comparing loans it is important to think about other factors as well as the price. For example, make sure that you are aware of how many repayments there will be and how much each will cost. This will allow you to calculate whether you can afford those repayments. It is also good to think about the lender and what their reputation is like, whether you trust them and what their reviews are like. This should be true of the car dealer as well as the bank. Car dealers will tend to use a finance company so try to find out more about who they use and do some research on that company as well. Although you will buy it through the car dealer, any interactions you have afterwards will be with the finance company not the dealer.

Save up instead

All car loans will be costly. You will be charged interest and there may be other charges as well. It is good to find out how much extra it will cost you and think about whether you feel that the car will still give you good value for money considering the extra money that you will have to pay for it. It is worth also considering whether you really need the car now or if you can wait and save up for it.

If you do not borrow money to pay for the car then you will pay a lot less for it. It is therefore well worth considering this option. Of course, you will need to wait and you may need a vehicle now and so this may not be possible. However, if you have a car that works, then saving up could be a good option. If you put aside the amount of money that you would need to pay towards a loan and pay it into a savings account then you will be able to save up for the car in less time than it would take you to repay the loan. This is because you will not only not have to save up the interest but you will be getting interest on the savings which, if you leave in the account, will also add to the amount that you have saved up.

Conclusion

These are just a few options to consider. It is worth thinking about them before you decide what to do. It can be easy to be tempted to get a loan from the dealer as it is easy and convenient and means that you will get the car more quickly. It may not be the best financial option though and so you need to think about the consequences of this. It can be hard to decide not to get the car right away and to delay, either to investigate alternative loans or to save up but it can be really worthwhile. Take some time to think about it and discuss it with others as they will be less emotionally attached to the new car than you will. It is worth it as you may even find that if you delay a better car comes along and you are glad that you waited as you can get even better value for money from this one.

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