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Can I Receive a Loan to Pay for Car Repairs?

By November 21, 2022No Comments
Woman in Car Repair Shop

Is it Possible to Get a Loan to Cover Car Repairs?

Car maintenance and repair costs are rising quickly, and the average American motorist spends more than $2000 a year to ensure their vehicle runs smoothly. If you’re not ready with cash or financing for auto repairs, the costs can put an enormous dent in your budget or trigger an emergency.

While cash payments are typically the most cost-effective finance for auto repairs, Let’s take an examination of other financing options:

Make use of a loan for the cost of auto repair

Here are three lending options to look into:

  • Personal loans
  • Payday loans are an alternative to payday
  • Title loan

Personal loan

Personal loans are installment loans that can be used for everything, even for auto repairs. Because they come with pre-determined interest rates, you’ll need to make payments for your time, which usually runs between 12 and 60 years. In contrast to an auto repair shop’s payment plan or specific credit debit cards, you won’t get interest-free deals. Personal loans can be found with amounts ranging between $1,000 and secured or unsecured.

  • When you get a secured loan, you’ll provide collateral to secure the loan. The collateral could be vehicles, properties, bank accounts, or other valuables because collateral lowers the risk of lending and allows you to qualify for loans more easily and may be able to get lower interest rates and greater loan amounts. Although your lender could confiscate your collateral if you cease making payments, secured loans are more likely to be obtainable for people with decent or bad credit since collateral helps reduce the risk of lending.
  • A no-collateral loan will rely more on your trustworthiness. Borrowers won’t lose their assets if they can’t repay the loan. Fair- or poor-credit borrowers face higher APRs for these loans. If you have a credit score of 669, which FICO considers a decent score, the average APR for an unsecured personal loan is 24.74 percent — more than double the average APR of someone with strong credit (720+).

Alternative loans for payday

The alternative payday loan (PALs) aren’t payday loans. These loans are provided by the storefront and online lenders and are accompanied by sky-high charges and interest rates. While the PAL can also be a loan for short-term use, it is provided by Federal credit unions.

Because federal credit unions offer APR rates set at 28% on these kinds of loans, PALs are provided with low-interest rates and more favorable rates than standard payday loans. To benefit from the loan that is a payday alternative, it is necessary to be part of a credit union with these loans.

Title loans

Although auto title loans can be very expensive, and some lenders offer APR rates of up to 300%, this loan might be beneficial if you’ve used up other loan options. Despite the possibility of the high APR rates, Car title loans have a couple of benefits too:

  • The car title loan is similar to secured loans in that you’ll be required to use your vehicle as collateral. This can make it simpler for certain customers, such as those with good or bad credit, to qualify for loans since the collateral can make it an investment with less risk for lenders.
  • Many lenders provide up to 25 percent of the value of a vehicle which could be a way to qualify for an amount higher than what you could get with a credit card, personal loan, or credit card. But it all depends on the worth of your car. It is possible to determine how the value of your vehicle could be worth it by using sources like the NADAguides.

Before you sign on the dotted line to sign a title loan on your vehicle, ensure that you know the terms and conditions you agree to. If you don’t pay back the loan, the lender may remove your car to pay for the remaining loan or even charge you an interest rate for repossession in certain instances.

Look through and compare offers to determine your situation’s most reasonable rates and terms.

You can apply for an entry credit card with a 0 percent or low-APR credit card.

Many credit issuers provide an initial offer of 0% APR for a short period to attract potential new customers. Credit cards may also offer cash rewards for purchasing a specific amount of funds within the first couple of months after you open the account. These benefits make the cost of car repairs less stressful.

When you take advantage of an initial APR deal, you’ll generally be given up to 12 or 15 years to settle the balance. If you don’t fix your credit by the time the offer is over, you’ll be charged interest that will be applied to the balance remaining. It is estimated that the average APR for new recommendations on credit cards is 19.47 percent, according to the most recent DimeBucks information.

If you have an existing credit card, check the APR. Your credit quality might provide a lower rate than what you could get from a personal loan or another financing alternative. The average APR for open accounts with assessed interest is 16.30 percent.

Contact your repair shop for the possibility of a payment plan

Most auto repair financing is provided as payment plans and lending establishments. These plans can be provided with credit cards that are used to pay for the costs associated with your car. Certain lenders collaborate directly with repair shops to settle the invoice. There are many advantages to this method:

  • The lenders who work with auto repair shops typically provide low- or no-interest initial rates and offer the ability to pay in a short time for car repairs.
  • Many lenders offer promotions and discounts that you could use to repair your vehicle. For instance, you could get deals on oil changes, tires, and other benefits available only to cardholders.

If a low- or no-interest rate for an introductory period sounds like a great deal, take note of the details. Interest rates will increase after the initial period. They will begin charging interest when you have a balance.

Consider, for instance, having a credit card with no interest for six months, which will charge you a 29.99 percent rate. If you start with a balance of $2,000 and don’t settle it within the timeframe, you’ll be set six months’ interest at this rate for the entire $2,000 and any other balance you have to pay.

The amount of interest you pay can accumulate quickly, So it’s recommended to repay the card during the promotional period. As with any financial agreement, read the complete terms before signing.

Spend less money on repair costs for your car

Even if you have to pay thousands of dollars for repairs, you can save money on car repair financing.

Find a shop and search for price match possibilities for estimates on repairs to your car, such as oil changes or more intricate tasks. Review online reviews and speak to your family and friends to find an honest mechanic who won’t make you pay for a costly journey.

The final and most cost-effective way to save money on repair work for your vehicle is to be able to make simple repairs on your own. You can search for videos demonstrating how to do the job on YouTube and Autozone and download repair manuals from the vehicle’s manufacturer.

Whatever your method of finance for auto repairs, when you’re done, you must put aside money to create your savings account to ensure that the next time you need it, you’ll be able to make a cash payment.

Luke Pitt