Key Takeaway: If you’re facing a necessary auto repair you can’t afford, auto repair financing with a personal loan or credit card may be an option. It can help to compare interest rates and fees across lenders before you choose a path.
If you need an auto repair that isn’t covered by your warranty or insurance and you don’t have cash on hand, a few financing options may help you cover the bill. We’ll review loan types and alternatives — and what to consider before you apply.
- What is an auto repair loan?
- What are my auto repair loan options?
- Personal loan lenders to consider for auto repairs
- How can I get auto repair financing?
- What are alternatives to auto repair loans?
- FAQs about auto repair financing
What is an auto repair loan?
An auto repair loan is a loan or other financing used to cover the cost of car repairs. It’s generally a personal loan, but there are also other loan types that you can use for funding. You may also finance auto repairs with a credit card — ideally one with a low introductory annual percentage rate, or APR, to help minimize interest costs.
What are my auto repair loan options?
Your primary auto repair loan options are traditional personal loans, payday loans, and title loans. Let’s take a closer look at what each loan type offers.
Traditional personal loans
Traditional personal loans are installment loans. These loans are repaid over a set term, usually with monthly payments. Your payments cover the amount you’ve borrowed as well as interest costs and other fees charged by the lender.
It can help to shop around for competitive rates when you’re seeking a personal loan — banks and credit unions may be a good place to start, and online lenders may also offer options worth comparing.
Before you borrow, review the terms of any personal loan offer. Here’s some guidance on common loan language.
- Principal — The principal is the amount of money you’re borrowing. This amount doesn’t include interest and fees charged by the lender.
- Fees — Your lender may charge fees related to your loan. These may include application fees, origination fees, late fees and prepayment penalties.
- Interest rate — The interest rate is the amount you pay to borrow funds. It’s usually expressed as a percentage of the amount you’re borrowing and doesn’t include fees or other charges associated with the loan.
- Annual percentage rate — The APR is the annual cost of borrowing. It includes fees and interest, so it’s typically higher than the interest rate.
- Repayment term — The repayment term is the length of time you have to pay back the loan. It’s typically expressed in months, not years.
Payday loans
Payday loans require you to borrow against your future paycheck. To get a payday loan, you typically give the lender either a post-dated check or permission to make an automatic withdrawal from your bank account at a future date. Payment may be due by your next payday and may include the full amount borrowed and any fees charged by the lender.
With payday loans, lender fees can be staggering, with APRs as high as 400% or more. On top of that, you may also get hit with additional fees if you aren’t able to repay the loan on the agreed-upon date. In some cases, these lenders allow you to extend loans by rolling them over to your next payday, but doing so also incurs additional fees.
If you’re considering a payday loan but want a cheaper alternative, consider contacting your credit union about a payday alternative loan. These loans typically range from $200 to $1,000 and are repaid over a one- to six-month period, with a 28% APR cap.
Title loans
Title loans use your car title as collateral. The loan balance and fees are usually due 30 days after the loan is issued. When these are repaid, your title is returned free and clear. But if the debt remains unpaid, you may face vehicle repossession. If you want to delay the payment date, you may face “rollover fees” and other penalties.
This type of loan is risky and expensive — it could cost you your car, and typical APRs can reach about 300%. According to the Consumer Financial Protection Bureau, more than two-thirds of auto title loan business comes from borrowers who take out seven or more consecutive loans because they’re unable to repay the high costs. The CFPB also reports that one in five borrowers who take out this type of loan ends up facing vehicle repossession due to nonpayment.
Personal loan lenders to consider for auto repairs
If you decide a personal loan is the right path, you may want to compare offers from several lenders. Here are a few that may fit different needs.
Good for flexible loan terms: Upgrade
Upgrade offers personal loans with terms ranging from 24 months to 84 months, which may allow you to choose between a faster payoff and lower monthly payments.
Good for quick funding: Personify
Personify offers an online application and states that, upon approval, it aims to deposit funds as soon as the next business day — so Personify may be worth considering if you need money quickly.
Good for flexible terms: PenFed
PenFed offers personal loans with no early payoff penalty, which may be a good fit if you want flexible terms on a shorter-term loan.
Good for those with less-than-perfect credit: OneMain Financial
In addition to unsecured personal loans, OneMain Financial offers secured loans backed by collateral — often a vehicle. If you’re having trouble qualifying for an unsecured loan, it could be worth considering a secured loan.
Good for no origination fees: Discover
Some personal loans charge an origination fee — a one-time charge for processing your loan. Discover states that its personal loans have no origination fee, which may help you save over the life of the loan.
How can I get auto repair financing?
To get auto repair financing, you first need to figure out how much you need. Then you need to contact different lenders, compare rates, and apply. Here are the steps to take.
- Determine how much you need to borrow to complete the repair. Doing so will help make sure you identify lenders who can fund the amount you need.
- Prequalify with a few lenders. Once you know how much you need, contact lenders that can provide that amount and see if you prequalify. Just keep in mind that prequalification isn’t a guarantee of terms or loan approval, and your loan rates and terms may change once you submit a complete application.
- Apply for your loan. After you’ve identified which lender you want to borrow from, submit a complete application. Your lender will likely perform a hard credit inquiry when you apply, which can temporarily affect your credit scores.
What are alternatives to auto repair loans?
Instead of taking out a personal loan, you may use repair shop financing, buy-now, pay-later financing, a credit card you already have, a credit card with a 0% APR introductory rate, or a car repair credit card. Let’s take a closer look at each.
Repair shop financing
Some repair shops, such as Midas and Firestone, offer credit cards that can finance your car repair. For example, Midas offers a credit card with low interest financing options.
Buy-now, pay-later financing
With buy-now, pay-later financing, you can pay for your purchase in installments over a short period. This type of financing is common in online shopping, and some apps also offer physical or virtual cards that can be used in stores. In some cases, this type of financing may be interest free, but it depends on the repayment method and the app you choose. Terms vary by app, and even if there’s no interest, there may be other fees.
Current card
You can use one of your current credit cards to pay for your auto repair, but keep in mind it may not be cheap. For example, at an APR of 15% with a $25 monthly payment, a $1,000 repair could take you 56 months to repay and cost you almost $395 in interest.
For that reason, you may want to use an existing credit card only for purchases you can comfortably afford to pay in full and on time within one billing cycle.
Credit card with a 0% APR introductory rate
To avoid interest charges, you may want to consider a credit card offering an introductory 0% purchase APR. These cards offer 0% APR during an introductory period after your account opens, typically lasting 12 months to 21 months. Remember that any balance remaining on the card after the introductory period ends will be hit with an APR.
Car repair credit card
Some credit cards are designed specifically to fund car repairs. Check the terms and conditions of any card you’re considering for current details, but start by looking for auto repair cards that offer low- or zero-interest financing.
FAQs about auto repair financing
One way to shop for auto repair loans without affecting your credit scores is to get prequalified. Checking to see if you prequalify for a loan usually involves a soft credit pull, which typically won’t affect your scores. It’s important to note that not every lender offers prequalification.
You can ask whether the repair shop offers financing. Some, such as Midas and Firestone, may offer credit cards that you can use to finance your repairs.
Yes — you may be able to pay for car repairs monthly by taking out a personal loan or using another financing option with installment payments.
If you can’t afford car repairs upfront, financing options may be available — including personal loans, credit cards, buy-now, pay-later plans and, in some cases, repair shop cards. Title loans and payday loans may also be available, but they tend to be expensive and risky.
Standard car insurance typically covers repairs only if they result from covered events, such as accidents. But some insurance companies offer add-on coverage called car repair insurance, also known as mechanical breakdown insurance. This coverage pays for certain repairs stemming from mechanical failures, but it typically doesn’t cover routine maintenance or repairs needed because of normal wear and tear.
Bottom line
Comparison shopping can help make auto repair financing more affordable. Before you take out a loan or apply for a new credit card to cover a repair, compare quotes for the work you need and review loan or card offers to find terms that may work for your budget. And if you want to prepare for the next surprise bill, you may want to start building an emergency fund over time.