Third-party premium finance
When you take out a contract of insurance and the up-front cost is just too high, one option is to arrange premium finance to split the lump sum into manageable monthly repayments.
Third-party premium finance involves a company paying the cost of your policy, on your behalf, upfront to the insurer and then collecting monthly repayments back from you.
You can get third-party premium finance arranged by an insurance broker or through the insurance company.
A charge for the credit is applied, which means you pay more for paying in instalments than if you paid upfront. The charges vary from company to company, but according to the Financial Conduct Authority (FCA) deals found via brokers can cost between 11% and 20%.
One of the benefits of premium finance is that you can combine multiple insurance premiums and pay a single premium to one company.
Insurer premium finance
Third-party premium finance can be useful, however, according to a report from the FCA, the average APR on third-party premium finance was much higher than that charged for insurer-financed plans.
Insurer-financed plans were found to charge APRs at around 5%, while the most common APRs offered by third-party premium finance providers ranged from 11% to 20%. So it's worth double checking if the insurer has its own financing option you can compare against.
And make sure you know exactly what it will cost - according to the FCA, insurers and insurance brokers alike are not clear enough about the full costs.
Cheap personal loans
Depending on how much you need to stump up for your insurance premiums, a personal loan could work out cheaper than other forms of finance.
With a personal loan you can borrow lump sums over a number of years and arrange to pay a fixed monthly repayment.
Rates fluctuate on these deals depending on how much you want to borrow and for how long, but at the moment lenders are offering some of the lowest rates in history.
Interest-free credit cards
A 0% purchase credit card could help you pay the lump sum needed for your insurance upfront.
As long as you repay what you spend within the interest-free period you won’t have to pay anything more. So it’s potentially the cheapest way to borrow if you plan it right. For a look at the top options, read The best 0% purchase credit cards.
If you don’t manage to clear the debt in time you could use a 0% balance transfer credit card to keep the size of the debt frozen. For the top cards, check out The best 0% balance transfer credit cards.
0% overdrafts
Some current accounts offer 0% overdrafts which can mean you borrow fee-free.
Deals are often reserved for new customers to encourage them to switch and are limited to 12 months or less, but other accounts offer a set amount you can borrow for free without a time limit.
Read The current accounts that still offer a free overdraft.
Getting the best price
Almost every household in the UK has at least one insurance policy, according to the Association of British Insurers. So chances are you will have to hunt around for an insurance quote at some point during the year.
loveMONEY.com can help you find the best deals on all sorts of insurance policies, including life, car, home, travel and private medical insurance.