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A personal loan is a common way to finance car repairs. Before applying, compare lenders online to find competitive rates. Consider the loan principal, fees and your debt-to-income ratio when comparing terms.
It’s also a good idea to get prequalified with multiple lenders (using a soft credit check) before choosing one. This process typically takes minutes and won’t hurt your credit score.
1. Personal Loans
If your credit score is high enough, you can get a personal loan to cover the cost of car repairs. You can apply for a personal loan online in minutes and receive a decision quickly. If you’re approved, funds can be deposited the same day or next business day. Personal loans have fixed interest rates and are an excellent option for avoiding paying more than you have to for auto repair expenses.
You can also ask family and friends for help if you don’t qualify for a personal loan. However, you’ll want to make sure you have a plan in place to pay them back before requesting this type of loan. Make sure you set up a payment schedule and keep it consistent so the loan doesn’t cause undue stress on your relationships.
Many Americans live paycheck to paycheck, which makes it challenging to afford unexpected repairs. You can dip into emergency savings or use a credit card, but these methods may not be sustainable long-term. Personal loans offer a way to avoid dipping into savings and can be a more sustainable solution.
Before approving you for a personal loan, lenders will review your credit report to make sure there are no red flags that could hinder your ability to repay. For example, a history of delinquencies will likely have a negative impact on your application. Lenders also look for a steady income that can be used to cover your monthly expenses and make your loan payments on time.
2. Credit Cards
Credit cards can provide an easy and convenient way to pay for car repairs. However, you should loans online understand that credit card interest charges can add up quickly if you don’t pay off your balance in full each month.
Many car repair shops partner with lenders to offer co-branded financing options. These cards usually only work at the associated shop and may offer a limited number of months of interest-free financing. For example, the Goodyear Credit Card is only valid for tires purchased at Goodyear locations and gas station purchases made at Exxon(tm) or Mobil(tm) stations.
Typically, these branded credit cards require excellent or good credit to qualify. However, there are general purpose credit cards with 0% interest offers that can be used anywhere and provide the flexibility you need for an auto repair bill. Some of these cards also come with travel rewards, cash back or other perks that can make them worth having in your wallet.
There are also personal loan marketplaces that specialize in lending for large expenses like car repairs. These lenders often have looser credit requirements than traditional banks, and you can submit a single prequalifying application to several different lenders. This can help you find the best terms and lowest costs for your loan. Depending on the amount you need, these loans can provide the money you need for your repairs as soon as the next business day or even sooner.
3. Repair Shop Financing
Many auto repair shops offer financing options like payment plans through partnered lenders and branded credit cards for customers to use at the shop. These products are often helpful for those with less-than-perfect credit because they are typically based on income, not credit scores.
Loans like these work in much the same way as personal loans, providing a lump sum to cover an expense and then being paid back in fixed monthly payments over a set period of time, often between two and seven years. Unlike mortgage loans, however, most of these loans are unsecured — the borrower doesn’t have to put up their home as collateral against the debt.
The benefit of these kinds of products for auto repair shops is that they enable them to close more sales with credit-challenged consumers who may not have the cash to pay upfront for a car repair. In addition, they can help entice borrowers to come to their shops rather than competitors that don’t offer these financial solutions.
It’s important to remember that any type of loan is a form of debt and should be considered carefully. When in doubt, stick with personal loans from banks or credit unions and avoid those predatory payday or title loans that charge astronomical interest rates. Also, if you have the ability to do so, comparison-shop for car repair loans before you commit.
4. Auto Equity Loans
Auto equity loans are secured debts that allow you to borrow against the value of your car. Lenders will assess your vehicle’s value, how much you owe on it, and your credit to determine eligibility. Auto equity loan rates tend to be higher than personal loans and credit card rates, and it’s possible to lose your vehicle if you don’t make payments on time.
Traditional community banks and some small lenders offer auto equity loans. These loans may be easier to qualify for if you have good income and credit scores. You can also find lenders that specialize in auto equity loans for people with bad credit. These lenders can provide you with a quick loan decision, typically based on the information you provide about your car and its value.
