Suppose you need car repair financing for an emergency not covered by your insurance. In that case, many vehicle repair options exist. Let’s compare the pros and cons of each option, including auto repair shop services, handling unexpected expenses, and looking into emergency car repair loans.
AAA’s survey found that maintaining and repairing a car can run an average of $1200 annually. Only one-third of U.S. drivers have enough money to cover unexpected repairs.
1. Auto Repair Financing Using Personal Loans
A personal loan is one of the best auto repair financing options, enabling you to obtain the funds you need to fix your car in an auto repair shop. These installment loans are suitable for managing unexpected expenses like emergency vehicle repairs. Depending on your approval by the lender, you can get funds in your checking account within 24 hours.
Online lenders will offer you monthly payments to repay the money over time. There are interest and fees that you need to pay. These can vary depending on the lender. During the application process, online lenders often require a credit check to review your credit report before determining credit approval for a suitable payment plan.
Can I Apply With a Bad Credit Score?
Your credit history could impact your ability to obtain a personal loan. The loan terms and interest rates you receive will depend on your financial situation.
Although you may be eligible for car repair financing, you may need more than the terms and interest rate offered to suit your needs. The cosigner will assure the lender that the debt will be repaid. However, remember that a credit approval could be more challenging with a poor credit score, and a credit check during the application process might lead to less favorable terms.
2. Traditional Loans: Car Repair Financing Loans
Banks and credit unions are good places for personal loans if you can compare rates. Like online lenders, you can compare terms among traditional personal loan lenders for auto and auto repair financing to find the best rates.
You should review the terms of your loan type before applying for money at any financial institution. Look at important details like:
This represents the principal amount that you borrowed, less interest and fees.
Additional costs can include application fees and late fees.
The amount you borrow money to pay is expressed as a percentage. These rates do not include any fees or other charges associated with borrowing money.
Annual percentage rate
The yearly cost of borrowing includes borrowing fees, usually higher than your interest rate.
Unlike unsecured loans, secured loans require collateral, such as a car or property, to secure the loan against default. These might be a more affordable option depending on your financial situation.
Most banks and credit unions offer online applications for their loans, making it a convenient way to submit your application quickly and easily from the comfort of your home.
Each loan will have a specific repayment period, when you must pay back the borrowed funds, which can vary from a few months to several years, depending on the loan terms.
The Repayment Term
This describes the time you have to repay your loan. It is often expressed in months.
Tip: You can get auto repair financing through alternative payday lenders. Contact your credit union to learn more about the network of lenders offering auto repair loans. The loans are available in amounts between 0 and $1,000. The payment terms are one to six months with competitive rates of a 28% interest rate limit.
3. Payday Loans
These are check-advance loans, also called cash advance loans. The lender will require a postdated check or permission to take funds from your bank account. Your next payday will determine the total amount of the loan and any fees.
There are risks and limitations to borrowing against your future salary. The maximum amount that you can borrow is restricted to a specific amount. Fees can reach up to 400%, even for small loan amounts. In some states, online payday loans are illegal.
Additional fees are possible if your account does not have enough funds at the time of the payment or if the loan is extended.
4. Title Loans and Auto Insurance
Title loans are short-term, risky financing options. If approved for a vehicle title loan, the lender will lend you money in exchange for your car’s name. After paying the fees and amount of the loan, you can get your car’s title back, which usually takes less than 30 days. It’s essential to consider having collision insurance when opting for title loans, as most auto lenders require it.
You are charged vehicle repossession or rollover fees if you default on loan payments, which allows you the option to defer your loan repayments. Suppose you’re concerned about expensive auto repair costs and want to explore alternatives to auto repair. In that case, it’s crucial to research loan options and insurance coverage to help you save money and protect your investment.
This is a risky way to borrow money. The average APR for a car title loan is 300%. The Consumer Financial Protection Bureau found that more than two-thirds of auto repair loan borrowers had their payments rolled over six consecutive times due to difficulties repaying high-interest rates.
According to the CFPB, 1/5 of borrowers lose their vehicles because they cannot repay the debt.
5. Auto Repair Loans With a Credit Card
A credit card is a quick and easy way for some to pay for an emergency repair. These are just some of the options that you should consider. However, it is important to understand the credit card agreement terms and know card interest rates. Moreover, knowing about payment allocation can help you make wiser decisions when making larger payments to credit card issuers.
6. Existing Cards In Your Wallet
A credit-card credit card could cost you a lot to repair your car. A $1,000 repair at 15% APR would require 56 months and a $25 monthly repayment, which could result in nearly $395 in interest. The repair would take 67 months and cost you $662 in interest at 20%.
We recommend that only existing credit cards be used for purchases you can afford to pay in full within one billing cycle. You must know your credit limit when making such purchases to avoid penalties.
7. A New Card That Offers a Low Initial APR for Those with Fair or Poor Credit
While using an existing credit card can lead to high-interest rates and costly car repair loans, there are other ways to get credit cards, especially for those with fair or poor credit. You can avoid high-interest rates by using unsecured credit cards with introductory or 0% purchase APRs. However, consider the Minimum credit score required for approval.
When using these cards, you can avoid interest fees for purchases made within the initial period after account opening. The introductory period typically lasts between 12 to 21 months. After the intro period, your card will be charged an annual percentage rate (APR). Any balance not paid by the end of the intro period will have the APR applied.
A credit card is a great way to finance your car repairs if you qualify for a card with an intro rate of 0%. You can pay full auto repair costs before the intro period ends.
8. Branded Cards From Your Auto Supply Store
Many mechanics and auto parts shops offer financing options via branded credit cards. One such option is the Care ™ credit card, which covers routine maintenance expenses.
Synchrony has partnered with major auto repair chains, including Midas Auto Parts and NAPA Automotive Parts. Customers can apply for a credit card with a co-branded logo for repairs, maintenance, or other expenses. PenFed Credit Union also provides an alternative option with Flexible credit requirements.
Napa AutoCare offers customers, such as a NAPA EasyPay credit card via Synchrony. The card comes with a few perks and no annual fees. Remember the savings from Gas station purchases using such cards.
At GreenDayOnline, we understand the importance of keeping your vehicle in top-notch condition. We are proud to offer a wide range of car repair financing options to assist you in overcoming unexpected expenses while ensuring your vehicle stays on the road. With our extensive network of partners and dedicated services, we are actively serving customers across numerous states throughout the United States. Below, you’ll find a comprehensive table showcasing the American states where our company is currently active, allowing you to conveniently locate your region and explore the car repair financing solutions available. Whether you reside in the bustling cityscapes of the East Coast or the serene landscapes of the West Coast, we have you covered. Discover the options available in your state, and let us help you finance your car repairs today.
|District Of Columbia
Below are some statistics on finding auto repair financing:
|The average interest rate for auto repair financing
|Percentage of drivers who will need to finance auto repairs at some point
|The average repayment term for auto repair financing
|Average repayment term for auto repair financing
|Percentage of drivers who finance auto repairs and default on their loans
Comparison shopping does not only help you find the lowest price on jeans or the best kitchen appliance. Comparing shopping can help you find auto repair financing.
Before you apply for a loan or credit card to finance your car repair, compare quotes. Ask mechanics for pricing information before you bring your vehicle in. A written estimate might be helpful as well.
Once you’ve decided where to fix your home, it is time to compare loan offers to ensure you get the best deal.
Avoid falling for the same trap. Create an emergency fund to cover your financial future.
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Frequently Asked Questions
What are the different financing options available for car repairs?
The main financing options for car repairs include credit cards, personal loans, auto repair loans, tapping emergency savings, borrowing from family/friends, using home equity, and manufacturer financing through dealerships.
How does a car repair loan work, and what are the eligibility criteria?
Car repair loans provide funds specifically for auto repairs that you repay in installments. Eligibility often requires a valid ID, proof of income, steady employment, and a checking account. Minimum credit scores vary.
Are there any government or nonprofit programs that offer financial assistance for car repairs?
Some nonprofits like Blessings in a Backpack and Good News Garage offer car repair grants for those in need. Government programs are very limited currently in providing financial assistance for car repairs.
What is the difference between using a credit card, personal loan, or specialized car repair loan for financing automotive repairs?
Credit cards offer rewards but higher rates, while personal loans have lower rates and set amounts. Specialized car repair loans are tailored for auto repairs but may charge higher interest.
Can I get a car repair loan with bad credit, and what are the alternatives if I have a low credit score?
You may qualify for a car repair loan with bad credit but at higher rates. Alternatives could include borrowing from family and friends, using credit cards if approved, or seeking assistance from charities.