Car Repair Loans: What You Should Know

Several costs are involved in car ownership, and one of the most dreaded is the bill for repair jobs. Even worse is when the damage or maintenance isn’t covered by your insurance or warranty. And unless you have a second vehicle that you can use in the meantime, you might need the cash for the repair on hand immediately. Fortunately, you have an option: a car repair loan. Car repair loans exist to lend you the money you need to get your vehicle back on the road pronto. Keep reading to learn more about auto repair loans.

Key Takeaways:

• When you’re on the hook for emergency repairs and don’t have money to pay for them, a car repair loan can help.
• Repair loans are convenient, and fast, and will get you out of a jam when the need arises- including new tires, broken windows, or transmission replacements.
• Your lender will assess your financial health- income, credit score, and employment history- before approving your loan application.

What Can Car Repair Loans Cover?

Car repair loans cover virtually any repairs or maintenance related to a car or other motor vehicle. Broken windows, new tires, oil changes, and even transmission replacements are some of the aspects that can be covered. You can also use the auto repair loan to upgrade the features of your car, but it’s recommended that you use the loan to pay for emergency repairs only.

How Do Auto Repair Loans Work?

When taking out an auto repair loan, you can expect it to work the same way as any other personal loan- unsecured or secured. Once you’re approved, the lender will provide the personalized loan terms. That’ll dictate how long you have to repay the loan, how much interest you’re charged, what your fixed monthly payments are, and if you’re allowed to repay the loan ahead of schedule without prepayment penalties.

Unsecured Personal Loans

Unsecured personal loans mean that you don’t need to guarantee the loan with existing assets like a house or car (putting up collateral). There’s no collateral, and hence you don’t run the risk of losing your assets by defaulting on the loan. However, you typically need to have excellent credit and a steady income to qualify for an unsecured loan.

Secured Personal Loans

These loans require collateral. If you take out a secured loan and put your vehicle up for collateral, the lender could take ownership of the car if you default on payments.

Car Repair Loan Requirements

Each lender has its approval requirements for a car repair loan. Typically, here are the requirements lenders consider:

• Credit Score: Lenders will typically perform a credit check to evaluate your history involving debt. They’ll use that to review to determine your financial health and how likely you are to repay the car loan. You may still get approved for the loan with a low credit score, but you’ll have to pay a higher interest rate.
• Debt-to-Income Ratio: Another requirement is how much you earn compared to how much you owe. A lower debt-to-income ratio shows lenders that you have room in your budget to factor in another bill (car repair loan repayment).
• Employment History: Job stability is another crucial aspect of your loan application. Lenders often want to see that you’ve been in the same industry for at least two years. That gives the assurance that you have the income requirement to repay the loan.

How to Apply for a Car Repair Loan

Borrowing money to pay for car repairs can be a straightforward process. Depending on your financial history and health, it can also be relatively quick.

• Repair Costs

You should determine how much you need to cover your car repair costs. Ensure that you account for aspects such as spare parts, labor, and any towing costs you may have incurred.

• Shop Around

Try applying for a car repair loan from various lenders, and shop through platforms like Credible to get several offers in one place. That will save you time and allow you to shop without affecting your credit score. It’ll also give you an idea of how much you can qualify for and the best offers available to you.

• Choose Your Loan

Choose a lender based on the best loan terms offered, such as monthly repayments, repayment period, and interest rate, and how quickly you can receive the funds. Then, apply for the loan. Note that submitting a loan application entails a hard credit check that might temporarily lower your score by a few points.

• Get Your Money

Your lender will evaluate your credit score, DTI, income, and employment history to approve your loan. They’ll deposit the funds into the account you specified. And based on the lender you pick, you could receive your loan funds as soon as the same or the next business day.

When Should You Use Car Repair Loans?

While repair loans are excellent, they shouldn’t be your go-to option whenever you need to fix something in your vehicle. Loans are expensive since you’ll have to pay the interest rates, fees, and other costs. There are different alternatives to car repair loans that may have better offers, such as payment plans at the dealership.

Car repair loans are helpful for car owners without insurance policies or warranties to cover damages. They are also useful for people who need their vehicles to run their businesses. Such businesses are losing money without their cars operational, so any damage that grounds the automobile can hurt the business. They don’t have time to wait to accumulate enough money to pay for the repairs. In that case, auto repair loans can get your business out of such tight situations.

Car Repair Issues? Contact Us!

Owning a car can be expensive, and unexpected repair costs can come out of nowhere. If you find yourself needing help to get your car back on the road, consult our auto repair experts. Besides guiding you on the very best repair financing options, we also offer excellent car repair services. Visit our dealership or contact us today, and we’ll help you get back on the road as soon as possible.

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