When to pay for car repairs with a personal loan (and when not)

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If you are facing car repair costs that you cannot pay out of your pocket, a car repair loan may help. Find out how they work and where to get one. (stock struggle)

Repairing your car can get expensive – especially with today’s high inflation rates.

If you are not able to cover an expensive bill, you can get car repair loan – a type of personal loan – may be an option. Here’s how auto repair loans work and how to decide if one is right for your unique situation.

If you are looking for a loan to cover car repairs, Credible makes it easy for you View pre-qualified personal loan rates From different lenders, all in one place.

What is a car repair loan?

A car repair loan is a kind of Personal loan without collateral that you can use to cover vehicle repair costs. This can include labor costs, spare parts, or even the rental vehicle that you need while your vehicle is in the store.

Auto repair loans have some major advantages, especially when compared to other financing options. First, they allow you to spread the cost of repairing your car over several months or years. Since they are usually insecure, they do not need side – Your car, home or other assets cannot be confiscated if you fail to make payments. Finally, these loans tend to have lower APRs than credit cards, which often have a nice double-digit APR.

On the downside, getting a car repair loan basically means taking out two car loans — and two monthly payments. It’s also not great if you have a low credit score, as this could mean paying a higher interest rate (or disqualifying at all).

Car repair loans are available at many banks, credit unionsand online lenders. You’ll want to shop around if you’re considering one of these loans, as rates, fees, and terms can vary from one lender to another.

How much does a car repair loan cost?

The cost of an auto repair loan — or any personal loan, for that matter — can vary widely. Your credit score, loan amount, and repayment terms will all play a role in your long-term costs. Your lender and the unique fees they charge will also affect your borrowing costs.

In general, the higher your rate and balance, and the longer you hold, the more interest you will pay. Lower rates, fewer balances and shorter tenures will reduce your interest costs in the long run.

To get an idea of ​​what a car repair loan might cost you, use Credible’s Personal Loan Calculator.

3 times when it makes sense to get a car repair loan

A car repair loan is not for everyone, but here are some scenarios where it might make sense to get it:

  • Your repair costs are more than you can pay out of pocket but less than the cost of a replacement car. If it seems more affordable to repair your car than to replace it – and you don’t have the money to do so – a car repair loan can be an option to explore.
  • Without the loan, you’ll need to put the repair costs on a high-interest credit card. If you need to cover car repairs with credit cards, payday loans, or any other high annual percentage product, a car repair or personal loan may be an affordable option.
  • You have a good credit score. If your credit score is high, you will likely qualify for a lower interest rate, which makes an auto repair loan an affordable way to finance your repairs.

Keep in mind that not all financial institutions offer the same rates and terms, so it’s important to shop around for financing your auto repair. Compare at least a few options before deciding which company you want to do business with.

Visit Credibility for Compare personal loan rates From different lenders, without affecting your credit score.

3 times when it makes sense to skip a loan or buy a new car

There may be times when it would be wise to explore other options instead of getting a car repair loan:

  • Your credit score is low. If you have bad credit and don’t have a cosigner, it can be difficult to qualify for a car repair loan.
  • Your car is still under warranty. In this case, your warranty provider may cover some of the repair costs.
  • The repair cost is the same as a newer car. If the repair costs are significant, you may want to skip the repairs entirely and replace your vehicle with a similar used car instead.

Can you get a car repair loan with bad credit?

Most auto repair loans are unsecured, so their terms depend on your financial profile and credit history. While it is possible to qualify for one with bad creditThis usually means paying higher interest rates. This equates to higher monthly payments and long-term interest costs.

Sometimes, if your credit score is low, the lender may also ask you to provide collateral or add a cosigner to your loan application. A cosigner is someone of good credit who agrees to share the responsibility of the loan with you (they will only make payments if you fail to do so).

How to get a car repair loan

Getting a loan for auto repair is fairly simple, and it can be done entirely online with many financial institutions.

To get yours, you can:

  • Determine how much you need. Get an estimate from your auto shop detailing expected repair costs. You may want to ask for a loan slightly larger than this in case labor or parts are more than expected.
  • Shortlisted a few lenders. Mix up the types of institutions you’re considering, including a major bank, credit union, and online lender.
  • Apply for a quote with both of them. To pre-qualify with a lender, you will need to fill out a short form and provide some basic personal and financial information.
  • Compare your options and apply with the lender of your choice. Look at the fees, rates, terms, and other details for each loan quote, and choose the lender you wish to work with. You will need to submit a formal application and may need to submit additional required documents, such as bank statements, payment slips, or tax returns.
  • Finalize paperwork for your loan. If the loan is approved, you will sign a loan agreement. You should get your money back within a few days, although some lenders can finance loans the same business day or the next business day after approval.

Once you have the loan funds, you can use the funds as necessary. Rent a makeshift car, pay the mechanic, or save some for the paint job you’ll eventually need.

Just remember: You’ll need to start paying off your loan right away, so budget accordingly. Make sure you have the funds to cover the down payment, and consider setting up automatic payments to ensure your payments are never late.

If you’re ready to apply for a car repair loan, Credible makes it quick and easy Compare personal loan rates To find one that fits your unique needs.

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