Interest on Direct Debit

Nap

Is it legal for a company to charge interest on monthly direct debit payment for insurance premium. I am being charged 19.6% for paying my car premium by monthly direct debit. Any advice will be appreciated.

dacouch

If you opt to pay your premium via instalments rather than in one payment your Insurer can charge a premium for interest

ValiantSon

Yes, it is absolutely legal.

You have, in effect, taken out a loan to spread the payment of the premium out and this loan charges 19.6% APR. This would have been made clear at the time that you applied.

In future, if you don't want to end up paying extra for your insurance then you need to pay for the full cost of the policy up front.

kingstreet

Some insurers/brokers charge no premium/interest for payment in instalments.

My own cover has this feature.

forgotmyname

Your not paying interest because your paying by direct debit, you could pay them by cheque or bank transfer or even cash.

Your paying interest because its an annual policy and you essentially took a loan out to pay it off. They have lent you the money to pay for the insurance and your paying that and the interest the same as any loan.

Although the interest rates can be fairly high with some. You need to shop around and see which companies charge the same, or have a lower interest rate.

Thats one reason why i started paying for the car insurance in full. Previously it was a monthly payment that i ignored. Only when cutting back and not paying interest i noticed how much extra it cost.