Can you pay for car insurance monthly?

Paying for car insurance monthly can make budgeting easier, but it can cost more than paying once upfront. We'll walk you through how monthly payments work, what to look out for, and all your other options.

Can you pay for car insurance monthly?

Often, yes. Insurers commonly let you choose between paying for the year in one go or spreading the cost with monthly payments. Check which options your insurer offers before you buy.

Monthly payments can make the cost easier to manage. But you may pay more overall for your car insurance policy because of added interest or charges. Your credit history can also affect whether you're approved for a monthly plan and how much it costs.

How much does it cost to pay for car insurance monthly?

What you pay depends on your circumstances, the cover you choose and how you pay.

How do insurers calculate monthly car insurance repayments?

The exact process varies between insurers, but it generally works like this:

• The insurer works out your annual policy cost.
• Interest or charges may be added if you pay monthly.
• The total is split into monthly payments.

Your first payment may be larger than the rest. After that, payments are often equal for the remainder of the policy.

How to check the total cost yourself

Monthly payments can look tempting, but they often cost more overall. Here's how to check the actual price:

• Add up every payment you'd make, including any deposit.
• Compare that with the price for paying yearly.
• The extra amount is what you're paying to spread the cost.

Always check the total amount payable and the APR (the yearly cost of the credit) in your quote or policy documents. It's the best way to compare monthly and yearly prices.

How can I get cheaper pay monthly car insurance?

Want to cut your car insurance costs? Here are some ways you might lower your price. Just remember, results vary by person and insurer, but these tips apply whether you pay monthly or yearly:

• Add a named driver, but only if it's genuine. Adding someone who really does drive the car may affect your price. Never list someone as the main driver if it's really you. This is called "fronting". It's a form of insurance fraud, and your policy could be cancelled or claims refused.
• Compare cover levels, not just prices. Comprehensive cover can sometimes cost less than third-party, but not always. Compare what each level covers as well as the cost.
• Improve your car's security. Some insurers take security devices into account. Check with the insurer which devices they accept.
• Compare quotes. Prices vary between insurers. When you get a quote, we'll show you options from the insurers we compare. Our comparison may not include every insurer or deal available.

Advantages of monthly car insurance repayments

• Spreads the cost. Instead of one large payment, you split the cost over the policy term.
• Can make budgeting easier. You'll usually know your payment amount in advance. Your first payment may be larger, and your payments can change if you change your policy.

Disadvantages of paying monthly?

• It can cost more. You may pay the annual cost plus interest or charges.
• It's often a credit agreement. The insurer or its finance provider may check your credit file. A hard credit check leaves a mark on your credit file that other lenders can see.
• Missed payments can harm your credit score and your cover. If you can't keep up with payments, your score could fall, your policy could be cancelled, and you may still owe the balance.
• It may not suit everyone. If your income is irregular or money is tight, think carefully before taking on regular payments.

Does paying car insurance monthly build credit in the UK?

Not reliably.

Paying your car insurance monthly won't reliably build your credit score. While some insurers might record your payments, many don't, especially if they're on time. However, insurers are more likely to record missed or late payments. This could seriously damage your score.

Please don't choose monthly payments just to build credit. Want to know more about how your credit score affects insurance? Check out our guide on how credit scores affect car insurance.

If your financial situation changes, get in touch with your insurer straight away. They might be able to help you with a new payment plan or by tweaking your policy.

Will I be credit checked if I pay monthly?

You might be. Insurers often take a peek at your credit history to decide if they can offer you a monthly plan.

There are two kinds of check:

• A soft check: This one doesn't leave a visible mark on your file for other lenders.
• A hard check: This is recorded on your credit file and could cause a small, temporary dip in your score.

Some insurers use one, some the other, and some both. Always check which type before you apply.

If your credit score isn't in tip-top shape, some insurers might not offer a monthly plan, or it could come with a higher price tag.

What are the alternatives to pay monthly car insurance?

Do you pay car insurance monthly or yearly? You can often do either. Many insurers offer both monthly and annual payment options, and paying annually is often cheaper overall because you avoid interest or charges.

If you can afford to pay upfront, paying annually may cost less overall. Your options include:

• Annual car insurance. You pay for the whole policy in one payment. This avoids the cost of spreading payments, but you'll need the money upfront.
• Temporary car insurance. If you only need cover for a short time, a temporary policy may suit you. If you own a car and won't use it, you may need to make a Statutory Off Road Notification (SORN). If your car is parked on a public road, it must be insured even if you aren't driving it.
• Pay as you go car insurance. Your price is based partly on how much you drive. This may suit you if you don't drive much, but check the total cost and terms.

Do I have to pay a deposit with pay monthly car insurance?

Yes, usually. But it depends on your insurer. Some ask for a bigger first payment, then split the rest evenly over your policy term. Others spread the total cost across all your monthly payments, so each one is higher, but there's no large upfront deposit.

You can find insurers who offer no deposit policies. Just remember, a lower upfront payment doesn't always mean a cheaper overall cost. Always check the total price. Find out more about no deposit car insurance.

Does the car insurance deposit cover the first month?

It might, but this varies. Your insurer will confirm exactly what your deposit covers. Always check this before you buy a policy.

Why is interest added to monthly car insurance repayments?

Monthly payments are often a credit agreement. Instead of paying the full amount upfront, you're borrowing to spread the cost, and interest or charges are the cost of that credit. That's why paying monthly can cost more than paying annually.

What happens if I miss a payment?

If a payment fails, your bank or insurer may try to take it again. Your insurer will usually contact you, and you may be able to pay manually by getting in touch.

If you still don't pay, your insurer may:

• send you a formal notice
• cancel your policy
• record the missed payment on your credit file, which can lower your credit score

If your policy is cancelled, you may still owe what's left of the balance, and it can be harder and more expensive to get cover in the future. Driving without insurance is illegal.

What happens varies between insurers, so check your policy and credit agreement documents. If you're worried about a payment, contact your insurer early. You can also get free help from MoneyHelper or StepChange.

Frequently asked questions