Auto Repair Financing

What is an auto repair loan?

An auto repair loan is any loan you can put toward your car repairs. There aren’t often loans that are specifically for auto repairs (unless the company doing the repairs offers financing) so you have a lot of different auto repair financing options to explore.

How does an auto repair loan work?

In most cases, your auto repair loan will be a personal loan. You apply and, once approved, the lender will deposit a lump sum into your bank account for you to use as you see fit. You can then use this money to pay for your repairs, and pay it back in monthly installments over the agreed term, which is usually 1-5 years.

What are the benefits of an auto repair loan?

• Access a lump sum of money specifically designated for your car repairs, ensuring you have the necessary funds to address the necessary fixes promptly and efficiently.
• Enjoy the convenience of most auto repair loans not requiring collateral, alleviating concerns about having your possessions seized in case of payment difficulties.
• Experience fast funding, with funds typically disbursed within 1-24 hours after approval (although in some cases, it may take up to 3 days), allowing you to tackle your car repairs without unnecessary delays.
• Customize your repayment term to align with your budget, selecting an option that offers manageable monthly payments and flexibility to suit your financial circumstances.
• Benefit from the ability to pay off your loan ahead of schedule with no penalties (be sure to choose a lender that allows early repayment), allowing you to save on interest costs and regain financial freedom sooner.

What can an auto repair loan be used for?

If you’re using a personal loan, the money isn’t tied to any one purpose. That means the money is yours to use as you see fit. Some of the common car-related expenses are:

• Engine repairs
• Transmission repairs
• Brake system repairs
• Suspension and steering repairs
• Exhaust system repairs
• Electrical system repairs
• Air conditioning and heating system repairs
• Fuel system repairs
• Cooling system repairs
• Tire replacement or repairs
• Wheel alignment and balancing
• Windshield or glass repairs
• Bodywork and paint repairs
• Diagnostic testing and troubleshooting
• Regular maintenance services (e.g., oil changes, filter replacements, fluid flushes)
• Timing belt or chain replacement
• Battery replacement
• Alternator or starter repairs
• Ignition system repairs
• HVAC system repairs
• Emission system repairs
• Belt and hose replacements
• Any other necessary repairs or maintenance to keep your vehicle in proper working condition

Are there alternatives to car repair loans?

Yes – a personal loan isn’t your only option. Some of your other auto repair financing options are:

• Credit card: A credit card can be a smart alternative, especially if your costs are minimal or you only need to cover the cost of your insurance excess. If you have good or excellent credit, you may be able to get a card with a long 0% APR introductory offer which will allow you to pay off your repairs over a term of 12-18 months with no interest.
• Home equity line of credit (HELOC): This is where you get a line of credit you can use from a lender, secured against your home. This works much like a credit card because you’re given a credit limit you can use up to, and you can usually reuse credit after you’ve paid it back. Just be aware that, because it’s secured against your home, your home may be seized if you don’t keep up on your payments, so it’s not usually worth it for car repairs. This option can take some time to set up.
• Home equity loan: Much like our option above, except you’re given a lump sum you pay back over an agreed term, like a personal loan. They also usually take a while to get, so aren’t often a good option for car repairs.
• Payday loans: Payday loans are short-term loans where you can usually borrow a few hundred or thousand dollars for a very short term – typically 3 weeks to 3 months. These often have astronomical interest rates and should be avoided since they often lead to financial trouble.
• Title loans: This type of loan is secured against your car. While this may seem like a sensible option at first glance, you need to be careful since you have to give them your car’s title to get them. This means that, while your car may be repaired, you may find yourself without one if you don’t keep up your payments since they can legally take it. They also often have extremely high interest rates, making it all the more likely that they’ll be able to take your car.
• In-house financing: Your auto repair shop may offer financing so you can spread the cost of your repairs. This can be a good option, but make sure you look at their terms and compare them to what you could get elsewhere to minimize the cost of your loan.
• In-house credit cards: If you go to a large chain to get your card repaired, they may partner with a credit card issuer to offer a branded credit card. Make sure you compare these with other cards to check they offer you good terms and worthwhile benefits.
• Friends and family: For some, borrowing from friends and family is a no-go, but if you’re close with your family and they are willing to lend you some money for repairs, this can be a cost-effective way to go about it. Just make sure you are diligent about paying them back as fast as you can to keep your relationship with them in good standing. Another alternative here is to ask if anyone close to you would be willing to co-sign a loan with you, which means they agree to pay for the loan if you default. Make sure this is someone very close to you if you go this route.

What credit score do I need to qualify for an auto repair loan?

Credit score requirements to qualify for an auto repair loan can vary depending on the lender and the specific loan product. Lenders have their own criteria for assessing creditworthiness, and while credit scores are an important factor, they typically consider other factors as well, such as income, employment history, and debt-to-income ratio.