Can you pay for car insurance monthly without paying interest?
Facts last reviewed 6 October 2026
Sometimes, but rarely on car insurance. Less than 3%1 of car insurance policies paid monthly in 2023 were interest free, against over a third2 of home insurance policies. The regulator has said that interest-free premium finance is a choice some providers make, that others charge interest, and that it does not intend to force the market one way or the other.
Who offers interest-free instalments
Some insurers let you spread the premium by direct debit with nothing added, usually because they treat the instalment plan as part of the product rather than as a separate loan. It is far more common on home insurance than on car insurance. In 2023, over a third2 of home policies paid monthly were interest free; on car insurance the figure was less than 3%1. If you find an interest-free monthly option on car insurance, check that the annual price has not been set higher to pay for it.
What the regulator decided
The FCA's final report on premium finance concluded that both models can work for customers: interest-free plans and plans that charge interest can each meet the Consumer Duty, provided customers can see what they are paying and compare. It chose not to cap rates or require interest-free terms, and said it would keep its focus on how firms deliver fair value instead. It also found that the cost of paying monthly had fallen, with customers saving about £157 million3 a year across the market, and that the average charge on car insurance was about 12%4 of the premium.
How to tell whether a monthly plan is really interest free
Multiply the monthly payment by the number of payments and compare it with the annual price. If the two match, there is no interest. Then read for fees: an arrangement fee, a charge for missed payments, a cancellation charge. A plan can be interest free and still cost more than paying annually once the fees are counted. Finally, run the same quote with annual payment selected, because some insurers price the policy itself differently for monthly payers.
Where InsPay fits
InsPay is being built to take the cost of paying monthly out of car insurance without asking you to find the annual premium yourself. A lending partner pays your insurer in full on day one. You repay that same amount in instalments, with nothing added for spreading it. What you pay for is the InsPay product, and its cost is shown in full before you agree to anything.
The second half is the excess. Your policy moves to a £1,000 combined excess, which lowers what the insurer charges for the same cover, and the InsPay product includes insurance that pays that excess when you claim. So the lower premium is real and the excess never reaches you.
InsPay is not the lender and not the insurer. The credit agreement is between you and the lending partner, your motor policy stays with your insurer, and the excess cover is provided by an insurer. InsPay arranges the payment and provides the product that holds it together.