12 month loan to pay car insurance in full?

Arbitrax

Hi all,

Just had an idea for a quick moneysaving wheeze, and thought I'd put it up here to see if I've missed something.

As a young lad who's recently learned to drive, my insurance is sky high (c£1100/yr). I don't have the savings to pay off the insurance annually, so I'm stuck with monthly payments, and the 29.1% APR they slap on. Or am I?

If I get a loan for £1000 for 12 months at 15-18% APR, I could pay it off annually and skip the APR, and have lower monthly payments?

Have I missed something, or would this be worth a go?

Thanks!

paddyrg

Well yes and no... Yes because paying lower interest is always good, but no in that the loan is unsecured so you're tied to a whole year of insurance. But also - crikey you're in over 20k of debt - looking at adding to that pile of loans is not going to make things better! Do you *really need* a car? Do you live in rural Wales and are a medic and need to be on call? Or do you live somewhere urban, could easily cycle to work, and do 9-5? I can't help but feel in my gut that you may find yourself overstretching once you factor in MOT's, fuel, parking, etc., too.

But, if you definately are buying a car and are sure you're running it for a year then yeah, save a few quid if you can find anyone who will lend you a grand for a year at that rate. But you may find it hard to interest lenders.

telboyo

If you are paying £100 per month for insurance on top of all your other motoring costs you will better off on Public transport.

Arbitrax

Thanks for the replies all

I take the point about the level of debt I'm in paddy, but 90% of it is Student Loan debt, and all but £300 of the rest is intrest free so i'm not in any great rush to pay it down. I've only just hit the £15k income mark after 2.5 years out of uni (Class of the Credit Crunch...:mad:)

And I live in rural Devon :rotfl: - and my work does require that I have my own transport.

Back to the wheeze...

Just looked into it and some Zopa loans are among the cheapest, but there's a blotch on my credit rating preventing me from applying. Commercial loans add a fee which basically wipes out the money saved. Might be worth a look for someone else who wants to shave pennies off their insurance!

Hax

The best option is to save monthly for it - then you have interest on your savings too - albeit very small!

Another option is to try and get a credit card with 0% on purchases and then use that to pay for your insurance.

If you can't get a 0% on purchases card - maybe you can get a 0% on balance transfers card. Then, if you have another card, you can buy your insurance on that and then transfer the balance. That'll cost you about 3%.

paddyrg

Heya,

Rural Devon, how picturesque! Yet many jobs will require wheels :-)

As you mention, Zopa only loan to flawless credit histories, and any blotch on your history will sadly raise the interest rates you have to pay!

Can you get included on your parents insurance for a really dull car? I just note you'll be paying (after fees, taxes, etc) over 10% of your income/takehome on car insurance - it is going to leave you really horribly exposed if any problems arise as you don't have any kind of 'buffer' to rely on! Just concerned, dude. Let us know how you get on :-)

Coveredinbees!!!!

It's worth shopping around, try for a low apr credit card (or 0%), just make sure you make the repayments every month!!!!!!

Stuart_W

As others have said, applying for 0% credit cards is certainly one option worth exploring.

Many of the best deals are harder to be approved for.

It is worth, if at all possible, making every effort to save before hand instead.

You are absolutely right to put reducing the 29.9% interest-bearing car insurance as a priority over and above other debts with lower interest rates - and you're right to disregard the student loan, your salary will worry about that.

If you are being rejected for credit cards and loans for now, a half-way house to make the transition to saving for your car insurance could be to join your local credit union. No credit checks involved.

Save an amount for few months, then you can usually borrow three or four times the amount you've saved.

For example - save £50 a month for five months (£250).
Withdraw you savings and add 3x savings loan (£250 + £750 loan)
You've got £1,000 to pay for insurance
Now pay in £160 each month to the credit union as you no won't need to pay monthly to the insurance company. (roughly that's the normal repayment amount plus £50 additional savings)
The first 7 payments of the year will clear the loan + interest, the next 5 are saving towards the next year.
The following year, you'll have £800 already saved towards the insurance - use the credit union account if necessary to add a top-up loan to pay the insurance premium, and by the following year, you'll have actually saved more than the insurance premium and can use the balance to clear other debts and pay less each month to the credit union - your insurance should also (hopefully) reduce after three years of driving.

Hope this helps.

This is roughly based on the highest legally allowed interest rate for credit unions (2% per month) which, actually, isn't that competitive against many loans and certainly any 0% deals, but it is a great way to really encourage saving, and assist with the transition from being a borrower to a saver. My local credit union are even able to provide me with a paypoint deposit card and every extra odd amount I pay in reduces interest on any loan balance immediately - and the odd extra quid here or there when I'm out shopping can really make a difference.

[Deleted User]

my credit union currently charges an apr of 12.9%,well below 2% per month

smitchy73

Some insurance companies are less APR than that, LV(liverpool Victoria - I'm not trying to promote) are only about 16% apr, I couldn't afford the one off payment this year after Xmas etc(no debt from Xmas though) so are paying off monthly, double monthly payment deposit + 9 payments.

But all thats good except that if that company charges more for the insurance in the first place, another way I was working it out was getting the quote for the one payment and then finding out the monthly installments, then working out the total payable from there, this gives you the real cost of the insurance.

I was in Nth Devon last October, lovely area, and can understand the need for a car regardless of costs!

Spendnsave2010

telboyo wrote: »

If you are paying £100 per month for insurance on top of all your other motoring costs you will better off on Public transport.

we pay £120 a month insurance - although is a 8 seater but still wouldnt be without the comfort of the car
i guess as its in first year may go down with no claims next year


as others have said shopping around for best or o% credit card would be a good option but you are then stuck with paying it off if you ever get rid of your car and no longer need the insurance