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Repairing your car can be expensive – especially with today’s rising inflation.
When you can’t pay an expensive bill, contact us car repair loan – some kind of personal loan – can be an option. Here’s how auto repair loans work and how to determine if one is right for your unique situation.
If you’re looking for a loan to cover vehicle repairs, Credible makes it easy View your prequalified personal loan rates from different lenders, all in one place.
What is an auto repair loan?
A car repair loan is a type of unsecured personal loan with which you can cover the cost of repairing a vehicle. This can include labor costs, parts or even the rental car you need while your car is in the shop.
Auto repair loans have some key advantages, especially when compared to other financing options. For one, they allow you to spread the cost of your car repairs over many months or years. Because they’re usually unsecured, they don’t need one security – and 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 APRs well into the double digits.
On the other hand, taking out an auto repair loan essentially means you have two car loans — and two monthly payments. They’re also no good if you have a low credit score, as it could mean you’re paying a higher interest rate (or not qualifying at all).
Auto repair loans are available from many banks, credit unions, and online lenders. You should do your research when considering one of these loans, as interest rates, fees, and terms can vary from one lender to the next.
How much does a car repair loan cost?
The cost of an auto repair loan — or a personal loan — can vary widely. Your credit rating, loan amount, and repayment terms all play a role in your long-term costs. Your lender and the one-time fees they charge also affect your borrowing costs.
In general, the higher your interest rate and balance, and the longer your term, the more interest you pay. Lower interest rates, lower balances and shorter maturities reduce your interest costs in the long term.
To get an idea of what a car repair loan might cost, use Credible’s personal loan calculator.
3 times when it may make sense to take out a car repair loan
An auto repair loan isn’t for everyone, but here are some scenarios where it may make sense to get one:
- Your repair costs will be more than you can afford out of pocket, but less than the cost of a replacement vehicle. If repairing your car is significantly cheaper than replacing it – and you don’t have the money to do it – then an auto repair loan may be an option to consider.
- Without the loan, you would have to put the repair cost on a high-interest credit card. If you would otherwise have to cover vehicle repairs with credit cards, payday loans, or another product with a high APR, an auto repair loan or personal loan might be a cheaper option.
- You have good credit. If your credit score is good, you could likely qualify for a low interest rate, making an auto repair loan an affordable way to fund your repairs.
Keep in mind that not all financial institutions offer the same interest rates and terms, so it’s important to research your auto repair financing. Compare at least a few options before deciding on a company.
Visit credible Compare personal loan rates from different lenders without affecting your credit score.
3 times when it may make more sense to skip the loan or buy a new car
There may be times when it’s wiser to explore other options rather than taking out an auto repair loan:
- Your credit rating is low. If you have bad credit and don’t have a co-signer, qualifying for an auto repair loan could be more difficult.
- Your car is still under warranty. In this case, your warranty provider can cover part of the repair costs.
- The repair costs are almost as high as for a new car. If the repair costs are significant, you may be able to skip the repairs altogether and replace your vehicle with a comparable used vehicle instead.
Can You Get a Car Repair Loan With Bad Credit?
Most auto repair loans are unsecured, so their terms are based on your financial profile and credit history. While it is possible to qualify for one bad credit, this usually means paying higher interest rates. This equates to a higher monthly payment and more long-term interest costs.
If your credit score is low, the lender may also sometimes require you to provide collateral or add a co-signer to your loan application. A co-signer is someone with good credit who agrees to share responsibility for the loan with you (they only make payments if you don’t).
How to get a car repair loan
Getting a car repair loan is fairly easy and can be done entirely online at many financial institutions.
To get yours you can:
- Determine how much you need. Get an estimate from your dealership that includes your estimated repair costs. You may want to ask for a slightly higher loan in case work or parts arrive higher than expected.
- Shortlist a few lenders. Mix and match the types of institutions you’re considering, including your main bank, a credit union, and an online lender.
- Apply for one loan offer at a time. To pre-qualify with a lender, you need to fill out a short form and provide some basic personal and financial information.
- Compare your options and contact the lender of your choice. View the fees, interest rates, terms and other details of each loan offer and choose which lender you want to work with. You must make an official application and provide any additional documentation that may be required, such as bank statements, payslips or tax returns.
- Complete your loan documents. If you are approved for the loan, sign a loan agreement. You should receive your money within a few days, although some lenders can fund loans the same or next business day after your approval.
Once you have your borrowing funds, you can use the money as needed. Rent a temporary vehicle, pay your mechanic, or save for the paint you need at the end.
Remember: you need to start paying off your loan right away, so plan accordingly. Make sure you have sufficient funds to cover that first payment and consider setting up automatic payments to ensure your payments are never late.
When you’re ready to apply for a car repair loan, Credible makes it quick and easy to do so Compare personal loan rates to find one that suits your unique needs.