Using a loan to buy insurance? Are you serious?

People take out bank loans for a whole variety of reasons but to buy insurance is seldom one of them. Taking out a direct loan to buy a vehicle, pay for a vacation, settle outstanding debts etc. is reasonable, but to use a loan to buy an insurance policy simply seems nonsensical.

This may have been the case with traditional loans, i.e. those that are taken out over a period of a year or more, but times have changed. In days gone by it was only possible to take a loan over a period of a year or more and a loans advanced for a year were expensive, so it would have been pointless to take out a loan to buy an insurance policy. Nowadays, there is a new breed of loan called the payday loan. Payday loans are very short term loans that are intended to provide people with a small amount of cash to cover them until their next pay check. Payday loans are loans on line that are paid directly in to your bank account and are great to cover emergency situations and unexpected costs, such boiler breakdowns and auto bills however they do have other uses as well, such as settling an auto insurance policy renewal.

Auto insurance is expensive, and car insurance quotes are rising year on year. Many insurance companies, such as allstate auto insurance amongst many others, permit insurance holders to pay for their auto insurance in monthly instalments, although this leads to additional costs over and above the base price of the auto insurance policy making it more expensive. When your car insurances quotes are received it is far cheaper to pay for the auto insurance in a single payment and payday loans can also be used for this purpose.

With a payday loan you can settle your auto insurance in a single payment and then repay the payday loan with your next pay check or over a couple of months should you wish. Payday loans carry a high interest rate and can be expensive, however when you consider the cost of the insurance is only a few hundred bucks and you will only have the loan for around a month or so, the interest cost won’t be too much. In any case, it will be much less than the cost of paying the auto insurance policy on a monthly basis over the year.

Payday loans are very useful sources of finance that you can use to cover a whole variety of different expenses. The interest rates attached to payday loans are high and they can work out very expensive if you let them run for a few months or more. However, if you use the direct loan as it is intended, i.e. to cover you until your next pay check, payday loans are not that expensive and often a cheaper alternative to other types of loans.