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Need money to pay for unexpected repairs to your vehicle? An auto repair loan can be a solution to get you back on the road. (iStock)
If you own a car, you will eventually come across an auto repair that is not covered by your vehicle warranty or insurance. It could mean a big bill, or get stuck without wheels.
Without sufficient savings to cover repairs, you will have to find the funds to get your vehicle back on the road. An auto repair loan is a solution to have your vehicle repaired and restarted. Here’s everything you need to know about this financial product.
What is an auto repair loan?
An auto repair loan is any type of loan that can be used to pay for repairs to a vehicle – it is usually a personal installment loan.
With an auto repair loan, you will borrow a lump sum that you can use to cover your auto repair bills. You will be responsible for the monthly loan repayment for a specified period, including interest at the agreed rate.
You can compare personal loan rates from various lenders within minutes using Credible.
How Do Auto Repair Loans Work?
When you take out an auto repair loan, you can expect it to work the same as any other personal loan. Once approved, your lender will offer you personalized loan terms. These dictate how long do you have to repay the loan, what your fixed monthly payments will be, the amount of interest you will be charged and whether you are allowed to repay the loan sooner than expected without prepayment penalties.
Personal loans are generally unsecured. This means that borrowers do not have to secure the loan with existing assets, also known as collateral. But borrowers generally need good credit and a stable source of income. in order to qualify.
Benefits of auto repair loans
If you are facing a high bill from your mechanic, taking out an auto repair loan has some advantages:
- No guarantee is required. Unlike many other loan products, personal auto repair loans are unsecured. You won’t need to set up guarantees – like the title to your car, the equity in your home, or your savings account – in order to take out the loan.
- You will receive the loan in a single payment. Your lender will provide you with the full loan amount all at once, so you can pay your repair shop and get started.
- Funding is usually quite quick. Depending on the lender you choose, you may be able to get your auto repair loan funds as early as the next business day.
- Interest rates are often lower than those of other products. The interest rates for personal loans are generally lower than those for credit cards or payday loans. Your actual rate will depend on your credit score, income, and loan terms.
How to apply for an auto repair loan
Borrowing money to pay for auto repairs can be a straightforward process. Depending on your unique situation and financial history, this can also be relatively quick.
1. Determine how much you need to cover your repair costs. Be sure to factor in things like parts, labor, and any towing costs you might have incurred.
2. Shop around for a lender. Apply for an auto repair loan from multiple lenders or shop on a platform like Credible to get multiple offers in one place. It not only saves you time and allows you to shop without affecting your credit score, but also tells you how much you can claim and gives you the best possible deals.
3. Choose your loan. Choose your lender based on the best loan terms available to you (such as repayment period, monthly payments, and interest rate), and even how quickly you can receive your loan funds.
4. Apply. Submit a loan request involves a credit check, which will temporarily reduce your score by at least a few points.
5. Get your money’s worth. Your lender will deposit your loan funds into the account you specified. Depending on the lender you choose, you can receive your funds the same day or the next business day.
Where to find an auto repair loan
Most banks, credit unions, and online lenders offer personal loans for auto repairs.
If you already have a relationship with a bank or credit union, you may want to know about the loan terms and rates they offer. Otherwise, shopping online can be a great way to get multiple deals at once without affecting your credit score.
Credible, it’s easy to compare personal loan rates from several lenders.
15 lenders to consider for auto repair loans
If you are in need of an auto repair loan, consider these 15 credible partner lenders.
Before
- Loan amounts: $ 2,000 to $ 35,000
- Minimum credit score: 550
- Funding time: From the next working day
Axos
- Loan amounts: $ 5,000 to $ 35,000
- Minimum credit score: 740
- Funding time: From the next working day
Best egg
- Loan amounts: $ 2,000 to $ 50,000
- Minimum credit score: 600
- Funding time: From one to three working days after successful verification
Discover
- Loan amounts: $ 2,500 to $ 35,000
- Minimum credit score: 660
- Funding time: From the working day following acceptance
Freedom Plus
- Loan amounts: $ 10,000 to $ 35,000
- Minimum credit score: Do not disclose
- Funding time: From two working days
Loan Club
- Loan amounts: $ 1,000 to $ 40,000
- Minimum credit score: 600
- Funding time: From two working days
Point Ready
- Loan amounts: $ 2,000 to $ 36,000
- Minimum credit score: 580
- Funding time: From the next working day
LightStream
- Loan amounts: $ 5,000 to $ 100,000
- Minimum credit score: 660
- Funding time: From the same working day
Marcus by Goldman Sachs
- Loan amounts: $ 3,500 to $ 40,000
- Minimum credit score: 660
- Funding time: Usually three working days
OneMain Financial
- Loan amounts: $ 1,500 to $ 20,000
- Minimum credit score: Nothing
- Funding time: From the same working day (but usually requires a visit to a branch)
PenFed
- Loan amounts: $ 600 to $ 50,000 (depending on loan term)
- Minimum credit score: 670
- Funding time: From two to four working days after verification
Prosper
- Loan amounts: $ 2,000 to $ 40,000
- Minimum credit score: 640
- Funding time: As soon as one working day
SoFi
- Loan amounts: $ 5,000 to $ 100,000
- Minimum credit score: Do not disclose
- Funding time: Three working days
To improve
- Loan amounts: $ 1,000 to $ 50,000
- Minimum credit score: 560
- Funding time: Within one working day after having carried out the necessary verifications
Reached
- Loan amounts: $ 1,000 to $ 50,000
- Minimum credit score: 580
- Funding time: As soon as one working day
When you are ready to apply for an auto repair loan, use Credible to compare personal loan rates in a few minutes.
3 auto repair financing options to avoid
If you have to pay for an auto repair and can’t (or don’t want to) take out a personal loan, you have a few other financing options. But they can be expensive, and you should only consider them as a last resort.
Payday loans
- Short repayment terms, often around two weeks
- Very high fees, corresponding to an annual percentage ranging from 390% to 780%
- Low loan limits ($ 100 to $ 1,000 depending on state regulations)
Car Title Loans
- Loans are generally limited to 25% to 50% of the value of your vehicle
- The title of your vehicle will be held as collateral
- Average financial charges equivalent to an APR of around 300%
- Usually needs to be paid back in as little as 15-30 days
Cash advance by credit card
- typically have higher finance charges than regular credit card purchases
- May also charge transaction fees
- If you do not pay off the balance in full, interest will accrue with the next statement cycle.
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