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As many people know, paying for car insurance in a one-off lump sum can be expensive.

With average premiums for comprehensive insurance ranging between £500-£700, spreading your payments over the year through monthly direct debits can seem like a sensible idea.

However, this can often be a more costly course of action. This is because most insurers charge a fee for making your payments affordable, usually taken in the form of an interest charge on your monthly payments. In some cases these interest charges can wipe out any savings you have made by searching out the best quote on your premium.

Most insurers charge annual interest of about 20 per cent to spread your payments over periods ranging from 10 to 12 months. The AA, the broker, charges 11.9 per cent over 11 months. Norwich Union, one of the largest motor insurers, charges 18.9 per cent for payments over 10 months.

And some insurers’ charges are far steeper. Provident, for example, charges an APR of 37.12 per cent to spread your payments by direct debit over nine months.

Moneyexpert.com, the price comparison website, calculates that on a fully-comprehensive premium of £700, paying by direct debit would add more than £100 at an APR of 20 per cent and more than £250 at an APR of 37.1 per cent.

The website suggests that if you can afford to pay upfront you should do so as you will be spared paying over the odds for spreading your payments over the year.

Another suggestion is to pay the whole premium by credit card as, believe it or not, many have cheaper APRs than the typical 20 per cent charged by insurers.

Even better, apply for a card with a zero per cent introductory offer and pay your premium that way.

If you cannot afford to pay upfront, then you may want to consider insurers who do not charge interest for customers paying by direct debit, says Moneyexpert.

These include Age Concern, Virgin, Bluesure and Zurich. Direct Line and Privilege are also said to have zero per cent offers.

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