Auto emergency repairs are never convenient and always seem to attack when we can least afford them. If you are in this situation, don’t be afraid. You are not alone and you have more options than you could imagine. If you have to pay for an auto repair, start with this simple guide. We tell you everything you need to know to get an auto repair loan.
When it comes to car ownership, we all have the same fear: you’re stuck in the driveway with a vehicle that won’t start, or you’re on the side of the road with a dashboard full of red warning lights. When it happens, a single thought immediately runs through his head: “How much is this going to cost me?”
Can car repairs be financed?
If your car needs emergency repair today or tomorrow, are you prepared to shell out hundreds (maybe thousands) needed to get it running again? If you are like most people, the answer is a resounding no.
Fortunately, there are several ways you can finance an emergency car repair and get back on the road.
Should I use a credit card to repair the car?
Before exploring your options for applying for an auto repair loan, you should consider hiding your credit card. While it may be tempting to use your credit card to get your car back on the road as quickly as possible, this can also be more costly in the long run.
Credit cards often have high-interest rates and short payment cycles. It’s also very easy to find yourself sliding into a pit of onerous consumer debt that’s hard to get out of when you use your credit card for high-priced items like an auto repair.
Instead, consider taking out an auto repair loan. Some can be processed in a day or two, so you won’t be stuck without a car for too long.
Secured and unsecured auto repair loans
As you explore the options for a car repair loan, you may come across two different types of loans: secured and unsecured. Everyone has their pros and cons, so it’s important to understand the differences between them before signing anything.
A secured loan is a loan in which you offer some collateral against the loan, such as your home or vehicle. With secured loans, you risk losing your asset if you don’t make your payments, but they can be a viable option when you have poor credit. They also often have lower interest rates than unsecured loans.
Unsecured loans, by contrast, are loans in which you do not have to offer any collateral against the loan. This makes them a safer option since you don’t risk losing your home or your second vehicle if you fall behind on payments. Because you are not offering any collateral, these loans will generally have higher interest rates than the guaranteed loans, so you will need to include that in your budget and what you can afford.
Types of auto repair loans
1.Online personal loan
A personal installment loan that can be obtained from several online lenders is one of the more flexible choices. While each lender will vary slightly, they are all normally fast (funds are generally deposited directly into your bank account within 24 hours), Easy (the application process can be done online), and most do not require upfront fees. They’re much more likely to accept bad borrowers, which can be a roadblock if you’re looking for a more conventional bank loan.
2. Bank loans
Another option is to apply for a loan or a line of credit from a bank. Under the right circumstances, this may be more beneficial to you as a borrower. For example, if you have excellent credit and don’t need to repair your car right away, a bank can offer you very competitive interest rates.
But if you have less than stellar credit or need to get your car back on the road as soon as possible, then a bank loan will present some challenges. Applications and approvals are often complicated, must be done in person, and are time-consuming. Even if they approve it, it may be a week or more before you see the funds deposited into your account.
3. Payday loans
If you are eager to repair your car quickly, it may be tempting to consider a payday loan. Resist the temptation. These are incredibly risky and should be avoided as much as possible.
With a payday loan, you’re borrowing against your next paycheck, which carries inherent risk on its own. On top of that, the additional costs can be positively huge, with interest rates that can exceed 400%. Payday loans often also require installments every two weeks and carry huge fees for missed or incomplete payments.
4. Car ownership loan
Similar to payday loans, equity loans are a type of mortgage and should be completely avoided. With a title loan, you can transfer the ownership of the vehicle to the lender. If you fail to repay the loan amount within the agreed period, you may be charged back the car. At best, you will face huge costs. All of these are above high average interest rates of 300% or more for car ownership loans.