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Need cash to pay for unexpected vehicle repairs? An auto repair loan can be one solution for getting you back on the road. (iStock)
If you own a car, you’ll eventually encounter an auto repair that’s not covered by your vehicle warranty or insurance. That could mean a big bill, or being stranded without wheels.
Without adequate savings to cover repairs, you’ll need to find the funds to get your vehicle back on the road. An auto repair loan is one solution for getting your vehicle fixed and running again. Here’s everything you need to know about this financial product.
What’s an auto repair loan?
An auto repair loan is any type of loan that can be used to pay for vehicle repairs — this is generally an installment-based personal loan.
With an auto repair loan, you’ll borrow a lump sum of cash that you can use to cover your auto repair bills. You’ll be responsible for repaying the loan monthly for a specific period of time, including interest at the agreed-upon rate.
You can compare personal loan rates from various lenders in minutes using Credible.
How do auto repair loans work?
When taking out a car repair loan, you can expect it to work the same as any other personal loan. Once approved, your lender will offer personalized loan terms. These dictate how long you have to repay the loan, what your fixed monthly payments will be, how much interest you’re charged and whether you’re allowed to repay the loan ahead of schedule without prepayment penalties.
Personal loans are generally unsecured. This means that borrowers don’t have to guarantee the loan with existing assets — also known as putting up collateral. But borrowers usually need to have good credit and a steady source of income in order to qualify.
Benefits of auto repair loans
If you’re facing a hefty bill from your mechanic, taking out an auto repair loan has some benefits:
- No collateral is required. Unlike many other loan products, personal loans for auto repair are unsecured. You won’t need to put up any collateral — such as your car’s title, home equity or savings account — in order to take out the loan.
- You’ll receive the loan in one lump payment. Your lender will provide you with the entire loan amount at once, so you can pay your repair shop and be on your way.
- Funding is generally pretty fast. Depending on the lender you choose, you may be able to get your auto repair loan funds as soon as the next business day.
- Interest rates are often lower than other products. Personal loan interest rates are generally lower than what you’ll find with 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, it can also be relatively quick.
1. Determine how much you need to cover your repair costs. Be sure to account for things like parts, labor and any towing fees you may have incurred.
2. Shop around for a lender. Apply for an auto repair loan from multiple lenders, or shop through a platform like Credible to get multiple offers in one place. This not only saves you time and allows you to shop around without affecting your credit score, but also tells you how much you may qualify for and provides you with the best offers possible.
3. Choose your loan. Pick your lender based on the best loan terms offered to you (such as repayment period, monthly payments and interest rate), and even how quickly you can receive your loan funds.
4. Apply. Submitting a loan application involves a hard credit check, which will temporarily lower your score by at least a few points.
5. Get your money. Your lender will deposit your loan funds into the account you specified. Depending on the lender you chose, you may receive your funds as soon as the same or 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 see what loan terms and rates they offer. Otherwise, shopping around online can be a great way to get multiple offers at once without affecting your credit score.
Credible makes it easy to compare personal loan rates from multiple lenders.
15 lenders to consider for auto repair loans
If you need an auto repair loan, consider these 15 Credible partner lenders.
Avant
- Loan amounts: $2,000 to $35,000
- Minimum credit score: 550
- Time to fund: As soon as the next business day
Axos
- Loan amounts: $5,000 to $35,000
- Minimum credit score: 740
- Time to fund: As soon as the next business day
Best Egg
- Loan amounts: $2,000 to $50,000
- Minimum credit score: 600
- Time to fund: As soon as one to three business days after successful verification
Discover
- Loan amounts: $2,500 to $35,000
- Minimum credit score: 660
- Time to fund: As soon as the next business day after acceptance
Freedom Plus
- Loan amounts: $10,000 to $35,000
- Minimum credit score: Does not disclose
- Time to fund: As soon as two business days
LendingClub
- Loan amounts: $1,000 to $40,000
- Minimum credit score: 600
- Time to fund: As soon as two business days
LendingPoint
- Loan amounts: $2,000 to $36,000
- Minimum credit score: 580
- Time to fund: As soon as the next business day
LightStream
- Loan amounts: $5,000 to $100,000
- Minimum credit score: 660
- Time to fund: As soon as the same business day
Marcus by Goldman Sachs
- Loan amounts: $3,500 to $40,000
- Minimum credit score: 660
- Time to fund: Typically three business days
OneMain Financial
- Loan amounts: $1,500 to $20,000
- Minimum credit score: None
- Time to fund: As soon as the same business day (but usually requires a visit to a branch office)
PenFed
- Loan amounts: $600 to $50,000 (depending on the loan term)
- Minimum credit score: 670
- Time to fund: As soon as two to four business days after verification
Prosper
- Loan amounts: $2,000 to $40,000
- Minimum credit score: 640
- Time to fund: As soon as one business day
SoFi
- Loan amounts: $5,000 to $100,000
- Minimum credit score: Does not disclose
- Time to fund: Three business days
Upgrade
- Loan amounts: $1,000 to $50,000
- Minimum credit score: 560
- Time to fund: Within one business day of clearing necessary verifications
Upstart
- Loan amounts: $1,000 to $50,000
- Minimum credit score: 580
- Time to fund: As soon as one business day
When you’re ready to apply for an auto repair loan, use Credible to compare personal loan rates in minutes.
3 auto repair financing options to avoid
If you need 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 costly, and you should only consider them as a last resort.
Payday loans
- Short loan repayment terms, often around two weeks
- Very high fees, which equate to an annual percentage rate ranging from 390% to 780%
- Low loan limits (anywhere from $100 to $1,000 depending on state regulations)
Car title loans
- Loans are generally limited to 25% to 50% of your vehicle’s value
- Your vehicle’s title will be held as collateral
- Average finance fees that equate to an APR of around 300%
- Typically need to be repaid in as little as 15 to 30 days
Credit card cash advance
- Usually have higher finance charges than regular credit card purchases
- May also charge transaction fees
- If you don’t pay off the balance in full, interest will compound with the next statement cycle
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