subject: Cheaper policies may come with higher interest charges for monthly payments [print this page] Cheaper policies may come with higher interest charges for monthly payments
Paying for a car insurance Ireland cover policy in monthly installments is a more expensive way of covering these costs.
This is the warning from the National Consumer Agency (NCA), who has chosen to review its figures on the level of interest rates that consumers who are paying their policies each month are being charged.
The agency revealed findings from their study that showed some insurers were charging interest rates of nearly 20 per cent to customers who chose to pay by installments.
The NCA said that up to 80 additional cost went on to a policy covering a typical family car with a premium of 800 because of the interest charge alone.
However, the National Consumer Agency has since revised its figures after receiving incorrect interest rates. It has now since emerged that rather than charging 7 per cent for allowing a consumer to pay by installments, one company actually charges 20.1 per cent, the highest interest rate charged by a motor insurer to consumers.
The company who quoted the cheapest interest rate of 4.25 per cent actually charges 13.4 per cent.
The original survey revealed that one insurer said it did not charge interest but gave a service charge of 8 per cent instead. A NCA spokesperson said that this has been changed from a service charge of 8 per cent to an annual corresponding rate (APR) of 18.6pc.
The State funded agency issued a warning to motorists stating that the high interest rates charged to those who pay each month may wipe out any savings made from good value insurance.
National Consumer Agency chief executive, Anne Fitzgerald said, "If you are shopping around for car insurance and you intend to pay by installments, it is important to know how much extra you are paying for this credit. Bear in mind that the provider that offers the cheapest insurance may not offer the lowest rate on installments."
Ms Fitzgerald advised drivers that it might be more cost-effective to take out a short-term loan to pay their insurance in one go, rather than paying for expensive monthly installment arrangements.
By law, providers should inform consumers of the cost of credit and the APR attached to it. This will allow the motorists to compare the costs between providers and decide whether they want to pay by installments or not.
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