Car Repair Loans 101: What Are They And When Should You Use Them?

Auto Repair FinancingAuto Repair Financing
Published on
November 7, 2023

Cars are expensive to maintain, but for the most part, they’re manageable. You expect to spend money on maintenance, fuel, insurance, tires, licenses, registration, and taxes every year. On average, these costs will remain the same, and you can anticipate the changes over the years.

However, one part of owning a car often comes as a surprise — car repairs. Some you can put off for a while, and others need urgent attention. Keep in mind, putting off repairs almost always leads to more expensive repairs or replacements.

If your car needs repairs, it’s better to fix it early. Like every car owner, you’d prefer to make the repairs as the need arises. The problem with this is that auto repairs can be expensive. Fortunately, there are options available to help costs.

What Is a Car Repair Loan?

If your car needs repairs and you don’t have the funds to pay, first check to see if the issues can be covered by your insurance plan or car warranties that will cover the repairs. If you have exhausted these options, you can seek other financing to pay for the repairs.

The details of the loan will vary depending on the lender. For example, some lenders will offer the loan as a secured loan. This means that you’ll need to provide collateral for the loan. In most cases, your vehicle title will serve as the collateral.

What Are My Car Financing Options?

Start by doing a thorough research and understanding the different types of auto repair loans. The most common options include:

Personal Loan:

You can get a personal loan to repair your car.

  • This will require quite a bit of paperwork to prove your creditworthiness.
  • Details about the loan will vary depending on the lender and type of loan.
  • Typically, the loan will have a loan repayment term, repayment schedule, and interest rates.
  • Fortunately, thousands of financiers offer personal loans, it should be easy to find a good deal.

Synchrony Car Care Financing: (Our Recommendation)

The last thing you want to do is take out another loan to repair the car on top of the main auto loan you may have just to pay for the car itself. This is where Synchrony Car Care comes in: It’s a credit card that makes vehicle maintenance more accessible.

  • You can use the card for auto repairs, tires, maintenance services, and gas refills. With the Synchrony Car Care card , you can make car-related purchases of $199 or more, and you get promotional financing (options of 6 months, no interest)
  • This means that you can use the card to pay for expensive car repairs and you’ll have several interest-free months to complete payments.
  • If you can’t make payments within the promotional period, you’ll be charged interest from the purchase date. Keep in mind that gas station purchases aren’t included in the promotional financing.

Auto Repair Shop Financing:

On rare occasions, some repair shops may offer payments that allow you to get the car repairs and pay in installments. Others offer deals from third-party lenders. Auto repair shops that offer the first option may require a deposit and the remainder in structured installments.

Should You Get an Unsecured Car Repair Loan?

As mentioned above, to qualify for a secured loan, you’ll need collateral. Think of the collateral as the insurance policy in case you fail to pay the loan. In most cases, you’ll secure your loan with your vehicle title. If you fail to pay, the financier can seize your car. The upside to secured loans is that they have lower interest rates than unsecured loans.

Car owners with a good credit history and score can seek unsecured car loans. There are fewer risks involved since you don’t need collateral. However, the interest rates tend to be higher.

Which of the three should you choose?

Your choice will depend on your credit score, history, and rates on offer. If you can get a secured loan at a better deal than an unsecured one, go for the cheaper one. Before you take any loan, whether it’s secured or unsecured, ensure that you can keep up payments.

Our Recommendation: Synchrony Car Care Financing

For most auto repair expenses, having a six-month timeline to pay back the cost of the repair is the best bet for those who need a quick solution to stay on the road, but are just short of having everything to pay for it all at once.

Being able to have same-day financing, without the hassles of all the paperwork to acquire a traditional loan, allows the repair shop to start the work right away and get you back on the road faster.

How to Apply for Traditional Car Repair Loans

Before you can apply for any loan, ensure that you shop around to get the best deal. Ultimately, you’ll have to pay for the loan, so you better make sure the interest rates and repayment terms are favorable.

Once you have compared loans from each available lender and chosen the best loan option, fill out the application forms. You’ll end up submitting a couple of documents to complete the application process.

After you apply, it can take anywhere from a few hours to over a week before your application is declined or approved. If your application is approved, you’ll receive your funds and can embark on repairs.

When Should You Use Car Repair Loans?

Although car repair loans are great, they shouldn’t be your go-to option whenever you need to fix something. Loans are expensive as you’ll always have to pay interest rates, fees, etc. There are tons of alternatives to car repair loans that may have better offers.

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

If you’re in a situation where you need funds to repair your vehicle but don’t have the cash or access to alternative credit options, you can use car repair loans. These loans are fast, convenient and will get you out of a jam when the need arises.

Can You Get a Car Repair Loan with Bad Credit?

Yes, you can get a loan even with a bad credit score and history. It’s unlikely that you’ll get an unsecured car repair loan, but you can get a secured loan. Since your car serves as the collateral, most financiers will offer secured loans. Therefore, a poor credit score shouldn’t stop you from acquiring an auto repair loan.

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