Jessica Sautter is a Content Writer for CarInsuranceCompanies.com with a Bachelor’s Degree from Eastern Michigan University in Elementary Education with a Major in Reading and a Minor in Mathematics.

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Chris Harrigan has an economic degree from Limestone College and an MBA from Clemson University. He previously managed auto insurance claims for Enterprise Rent-A-Car. Currently, he is using his business and insurance expertise to provide insurance data analysis and visualizations to enhance the user experience.

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Reviewed by Chris Harrigan
Former Auto Insurance Claims Manager

UPDATED: Sep 28, 2020

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Key takeaways...

  • It’s illegal to drive without insurance
  • Your driving history, credit score, and marital status can affect your premiums
  • Some auto insurance companies allow for electronic payment of their clients’ premiums

Car insurance can seem to be a purchase that people resent having to make, but it is a necessary expense. In order to bring down the cost of car insurance, some people may want to seek ways to finance it.

This possibility does not seem to exist, but people may be able to find ways to make auto insurance more affordable by doing things such as comparing quotes online.

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Table of Contents

What does it mean to finance?

When people speak of financing a project, they are speaking of seeking funds for that purpose. One common item that is often financed is the vehicle.

This would be in the form of an auto loan which is a loan that people can receive from a bank in order to purchase a vehicle.

The car purchaser will make monthly payments with interest on this loan until it is paid.

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How Auto Insurance Companies Work

After an auto insurance company has checked on the background of potential clients, they will offer these potential clients a quote. The quote will tell people how much they will be paying for their premiums.

They have the option to pay for their premiums in different installments:

  • They can pay on a monthly basis
  • A quarterly basis
  • A semi-yearly basis
  • A yearly basis

People who want to lower the amount of money they pay for their insurance may choose to pay the entire sum up front.

But those who are seeking to finance their car insurance may be thinking of doing so because they do not have this large chunk of money to pay all at once from the beginning.

In that case, they can choose to pay on a monthly basis and find affordable car insurance.

This option will force them to pay more overall for car insurance because an amount of money will be added to cover the auto insurance company’s administrative costs.

If a policyholder is forced to choose the monthly option for paying their premiums, they can, in a lot of cases, receive a discount.

Some auto insurance companies allow for electronic payment of their clients’ premiums. This option saves the insurance company money because they are not printing bills and mailing them, so they are willing to give customers a financial break.

How much is auto insurance?

For the year 2010, the most expensive auto insurance rate comes from the state of Louisiana. In this state, people paid on average, $2,510.87 for auto insurance.

In the least expensive state, Maine, the average yearly premium was worth $902.85. These numbers, although they may seem large, are relatively small amounts of money.

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Banks and Their Lending Practices

It would be extremely difficult for a car purchaser to obtain a loan from a bank for $2,510.87, because banks, traditionally, do not make loans for amounts this small.

The other option people would have if they really need to finance their auto insurance is to obtain an unsecured or secured loan from a lending institution that is not a large bank.

Personal Loans

People who do not have the option of going to a bank for a loan may be able to obtain a personal loan that is either unsecured or secured.

The Unsecured Loan

The unsecured loan is a loan that people can obtain for smaller amounts of money. Some of the characteristics of the unsecured loan are:

  • No credit check required
  • No collateral needed
  • High interest rate

The unsecured loan, because it does not have anything backing it such as a house as collateral, will be subject to the highest interest rates.

These types of loans present the highest risk to lending institutions, so they need to cover this risk with a high-interest rate.

The Secured Loan

The other alternative is to seek a secured loan. This loan will give the borrower a lower interest rate because there will be something offered to the banks as collateral that will lower their risk.

But this loan will put something at risk such as the borrower’s home if anything ever happens that would make it impossible for them to pay back the loan.

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A Better Alternative

People who are having financial difficulties do not have to resort to drastic measures such as taking out an unsecured personal loan to pay for their auto insurance.

The better alternative is to patronize an insurance broker’s website.

The insurance broker’s job is to seek several low auto insurance quotes for their clients so that they have the best chance of receiving auto insurance for the lowest price.

Auto insurance brokers represent many auto insurance companies, and they all know that they are in competition with each other. Because they know that the competition is so high, they will be willing to offer good deals to new, potential clients.

Different companies have different reasons that they offer discounts to their customers. Some companies are also looking for a particular kind of client whom they like to insure.

They reward these people for being the “right” clients by giving them the best rates.

For people to look for these auto insurance companies on their own would be time-consuming, but the auto insurance broker will do all of the work for them.

It is not likely that people who need auto insurance will be able to finance it, but it is not necessary to act in such a desperate manner.

Seeking auto insurance quotes online through an auto insurance broker will give these people several quotes in a matter of minutes.

This makes seeking the help of an auto insurance broker the much more convenient option. People can even begin their quote search right after they read the last word of this article.

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References:

  1. https://en.wikipedia.org/wiki/Maine
  2. https://www.allstate.com/auto-insurance.aspx
  3. https://www.investopedia.com/terms/u/unsecuredloan.asp
  4. https://www.thebalance.com/cash-secured-loans-315598
  5. https://www.progressive.com/