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If you need auto repairs but don’t have enough cash on hand, it may be possible to borrow funds. Here’s how it works and some alternatives you can consider.
Loans for auto repair are specialized personal loans used to cover car expenses. To find the best option for you, determine how much you need to borrow and shop around.
Getting a Loan
If your car needs an expensive repair or you’re not sure how you’ll cover the costs, an auto repair loan may help. These are typically personal loans that provide fixed payments and manageable terms. They can also have lower interest rates than credit cards or in-house repair shop financing plans.
The loan process begins with applying online or in person at a lender. You’ll be asked to submit information like your income, creditworthiness and debt-to-income ratio. If approved, you receive the loan amount and begin your repayment schedule. Loan terms can vary from lender to lender but typically include the amount borrowed, interest rate and fees.
Some lenders offer loans for auto repair that require no collateral, but others will ask for a vehicle title or other form of security. If you borrow against your vehicle, you risk losing it if you can’t repay the loan and fees.
Some in-house auto repair shop financing plans and third-party credit cards can offer 0% interest wonga loan interest rate introductory periods or low rates, but be sure to check the regular terms before choosing this option. Similarly, buy-now, pay-later apps like Affirm and Afterpay may offer payment plans for specific repairs or auto-related purchases. They can be convenient but often come with high rates and fees. Make sure you compare quotes before deciding on a plan and always pay your bills on time.
Lenders
If you need a car repair but don’t have the funds, an auto repair loan or financing option might be available to help. These loans are typically personal installment loans, meaning you’ll pay back the amount you borrow through regular monthly payments. Banks, credit unions and online lenders offer these types of loans, which can come with varying rates and repayment terms.
Personal loans require you to supply some basic documentation, such as your income, credit history and existing debts, to determine your eligibility. You can prequalify for a personal loan through a marketplace like Credible to get quotes from multiple lenders, then compare APRs and loan terms to find the best option for your needs.
Some repair shops also provide in-house financing or third-party payment plans, which can include a low introductory rate to reduce the upfront costs of repairs. You can apply for these at the shop or through a third-party lender, and some service centers may allow you to complete an application online to get faster approval.
If you’re unable to qualify for a loan or don’t want to take on additional debt, another option is using savings or an emergency fund. This can help you avoid expensive fees and interest charges, while avoiding the stress of an unexpected expense. Alternatively, you can work with a local lender who specializes in auto repair financing.
Interest Rates
While loans for auto repair are a good option when you need money, it’s important to remember that you will pay interest. The amount of interest you will pay varies depending on the annual percentage rate, loan terms and other factors. In many cases, this will make the overall cost of the loan greater than the cost of the repair itself. In some cases, lenders may offer cost-effective coverage options that you can add to your loan to help deflect some of these costs.
If you need to finance an expensive repair, try to find a lender that offers low fees and competitive rates. This will help you avoid paying too much in interest charges, while still having the cash you need to get your car repaired and back on the road.
Another option is to talk to your auto insurance company about covering some or all of the repair cost. Some auto insurers even offer a special plan for their customers called Mechanical Repair Coverage or MRC. This plan helps reduce or eliminate the need for costly repairs by covering part or all of the cost if the repair is needed due to covered damage. This could save you a lot of money in the long run, and it’s worth checking out if your insurance provider offers it.
Payments
Whether or not to use loans for auto repair is a personal decision, and each borrower has unique financial circumstances. It’s important to consider all options and understand the costs associated with each one.
Using an installment loan to pay for repairs can provide quick access to funds. Many lenders can give you a decision in as little as one business day and fund the loan within a week of approval. Personal loan terms like interest rate and repayment schedule may vary depending on the lender and your credit profile, so it’s crucial to shop around for the best offers.
Another option is to use a credit card to cover the repair cost. Many credit cards offer periods of 0% interest on purchases, which can help reduce the total cost of the repair. It’s important to remember, though, that credit cards come with high interest rates if you carry a balance.
In some cases, the repairs you need might be covered by warranty or auto insurance. Check with the repair shop and your insurance provider to see what coverage is available. If the repairs are covered, you may be able to avoid a loan by paying for them with cash or through third-party financing at the repair shop. Be sure to check your car’s warranty coverage and active recall status before considering a loan.