Car Repair Loans: How to Get Your Vehicle Back on the Road in a Hurry
Emergency car repairs are never convenient and always seem to strike when we’re least able to afford them. If you’re in this situation, have no fear. You’re not alone and you have more options than you might realize. If you have an auto repair you need to pay for, start with this simple guide. We tell you everything you need to know about taking out a car repair loan.
When it comes to car ownership, we all have the same fear: You’re stuck in the driveway with a vehicle that won’t start, or you’re stranded on the side of the road with a dashboard full of flashing red warning lights. When it happens, a single thought immediately runs through your head: “How much is this going to cost me?!”
Can you finance car repairs?
If your car needs an emergency repair today or tomorrow, are you prepared to fork over hundreds (maybe thousands) needed to get it back on the road? If you’re like most people, the answer is a resounding no.
Fortunately, there are several ways you can finance an emergency car repair and get yourself back on the road.
With a car repair loan, you don’t have to hand over a large lump sum of cash—which you likely need for other critical things like rent or groceries—in order to get your car back on the road.
Should you use a credit card to pay for car repairs?
Before you explore your options for taking out a car repair loan, you should strongly consider hiding your credit card. While it might be tempting to use your credit card to get your car back on the road as fast as possible, this can also be more costly to you in the long run.
Credit cards typically have high interest rates and short payment cycles. It’s also very easy to find yourself sliding into a pit of burdensome consumer debt that’s hard to get out of when you use your credit card for big-ticket items like a car repair.
Instead, consider taking out a car repair loan. Some can be processed in a day or two, so you won’t be stuck without a car for too long.
Secured vs. unsecured car repair loans
When you’re exploring your options for car repair loans, you’ll likely come across two different categories of loans—secured and unsecured. Each one has its own pros and cons, so it’s important to understand the differences between them before you sign anything.
A secured loan is a loan in which you offer some collateral against the loan, such as your house or vehicle. With secured loans, you risk losing your asset if you fail to make your payments, but they can be a viable option when you have poor credit. They also often carry lower interest rates than unsecured loans.
Unsecured loans, by contrast, are loans in which you don’t have to offer any collateral against the loan. This makes them a safer option, as you’re not at risk of losing your house or second vehicle if you're late in making payments. Because you’re not offering any collateral, these loans will usually have higher interest rates than secured loans, so you’ll have to factor that into your budget and what you can afford.
Types of car repair loans
How do you get a car repair loan? Which type of loan should you pursue? There are several different options to choose from, and there are pros and cons to each type of loan available.
When you’re comparing lenders, always make sure you understand the terms of the loan and the interest rates you’re being charged.
1. Online personal loans
One of the more flexible options available is a personal instalment loan which can be issued from a variety of online lenders. While each lender will differ slightly, they’re all typically fast (funds are usually deposited directly into your bank account within 24 hours), simple (you can complete the application process online), and most require no upfront fees. They’re also more likely to approve those with poor credit, which can be a roadblock when you’re seeking a more traditional bank loan.
2. Bank loans
Another option is to apply for a loan or a line of credit from a bank. Under the right circumstances, this can be more beneficial to you as the borrower. For instance, if you have excellent credit and don’t need your car repaired right away, a bank can offer very competitive interest rates.
But if you have less-than-stellar credit or need your car back on the road ASAP, then a bank loan will present some challenges. Applications and approvals are often complicated, need to be done in person, and very time-consuming. Even if you’re approved, it might be a week or more before you see funds deposited into your account.
3. Payday loans
If you’re anxious to get your car repaired quickly, it can be tempting to consider a payday loan. Resist the temptation. These are incredibly risky and should be avoided as much as possible.
With a payday loan, you’re borrowing against your next paycheck, which carries an inherent risk all by itself. On top of that, the extra costs can be positively enormous, with interest rates that can exceed 400%. Payday loans also often require payment installments every two weeks and carry huge fees for missed or incomplete payments.
4. Auto title loans
Similar to payday loans, title loans are a type of secured loan that you should avoid entirely. With a title loan, you hand over the title of your vehicle to the lender. If you fail to repay the loan amount by the agreed deadline you risk having your car repossessed. At best, you’re faced with massive fees. All of this is on top of the high average interest rates of 300% or more for auto title loans.
Do auto repair shops offer financing
Some auto repair shops offer in-house financing or work with a partnered lending company that will help you pay for your repair but you should always check to see what their specific repayment plans entail. Auto shop financing might be convenient but that convenience could cost you. If the terms aren't right, it’s wise to shop around for a loan from an independent lender.
Instead of a car repair loan, you might want to consider a new car...
Of course, at a certain point fixing an old car is simply wasting money. The older they get the more costly they become in terms of routine maintenance, regular servicing, and emergency repairs.
Rather than taking out a loan to repair your current vehicle, it might make more sense to purchase something more reliable.
For example, let’s say you take out a personal loan to finance a $2000 car repair and are making monthly payments of a few hundred dollars to repay the car repair loan. By the time you repay that loan, it might be time for yet another costly repair. Meanwhile, the car has continued to significantly diminish in value. You’re now locked in a cycle of throwing good money after bad.
Instead, why not check out our calculator to see if an upgrade would be more affordable? The car loan calculator does the car payment math in a few seconds, so you don't have to.
Getting approved for your next car is easier than you think, even if your credit isn’t where you want it to be. Click here to get pre-approved for free and shop hundreds of certified vehicles today!