Your car is broken, and you need it repaired asap (like yesterday). The cost to repair the problem is more than you’re willing or able to part with out-of-pocket, so you need to know which financing option will be the cheapest and easiest.
Sound familiar? Not to worry. Below is the ultimate guide to car repair financing.
It will break down your options, what they entail, and the pros and cons of each. By the end, you’ll have the information you need to make the best decision for your situation.
First, can you get car repair financial assistance?
There are a couple of things you should check before looking into car repair financing costs.
Is your car under warranty?
If your car is under warranty, you may not need to pay for the repairs. This is ideal. Most new cars come with a warranty whether it’s bumper-to-bumper, powertrain, or both. The warranty is valid for a set number of years and miles and, in some cases, even if the car changes owners.
If you bought the car new from the dealer, you can call them and give them your vehicle identification number (VIN). They will then be able to tell you if you are under the factory warranty or not.
On the other hand, if you bought it from a private seller, you can check the warranty status on CARCHEX by chatting with a representative on their live chat service. You can also try calling the dealer and asking about the warranty for your make and model.
If you bought an extended warranty, be sure to check if it covers the problem. Also, keep in mind, many extended warranties are transferable. So, if you bought the car from a private party, check your paperwork to see if you have one.
Do you have insurance that pays for mechanical breakdowns?
While a typical collision and comprehensive car insurance policy won’t cover mechanical problems that occur on their own, select insurance providers do offer mechanical breakdown insurance (MBI). Geico and Progressive are two examples.
MBI functions like an extension of a vehicle’s warranty. You can select coverage for the whole car or only for the car parts you want. If a problem occurs, you just pay the deductible, take it to a mechanic (approved by the insurer), and they will pay the mechanic directly.
If you have this insurance, it can reduce your out-of-pocket costs, eliminating the need to finance repairs.
Second, should you repair it?
Additionally, you should contemplate if your car is worth repairing or if it’s time to replace it. If the costs to repair it are going to be too high, it may be better to sell it or trade it in and invest in a new car.
This is the same line of thinking used by insurance companies when they declare a car “totaled.” If the cost to repair it is more than 60% to 80% of its value, they will declare it a total loss and provide a check for a new car.
To determine if it’s worth repairing, you’ll need to consider how much you owe on it, the current value, how much you are paying per month, the ongoing maintenance costs, the current repair cost, and how much you’ll pay with a new car.
OJ Lopez, owner and founder of Fluid Motor Union, says, “The main reasons to buy a car new are to take advantage of a rebate or incentive, a write-off, a warranty, and less hassle knowing you’re the first owner. The immediate depreciation that occurs when buying, however, is a loss no matter how you look at it.
A good way to combat this is to buy a car within a one or two-year window period from new. It will still have a warranty in most cases, and they will often offer an aftermarket extended warranty.”
If it is cheaper in the long run to get a new car, you may save yourself future troubles. However, if your car is worth saving, you may be asking, “How can I get my car fixed with no money?”
Top 5 car repair financing options
Richard Reina, product training director for CARiD.com, says, “The cost to own and operate a car is upwards of $8,000 per year, and a good portion of this money goes towards repairs and maintenance.”
When it comes to financing those costs, here are five options you should consider.
1) Auto repair shops that finance
The technician or shop you choose may let you make payments on car repairs. If they do, you will usually get a set term over which you will pay back the amount with interest.
The advantage of this route is that they may be willing to lend to you when other lenders won’t. They may also offer you good terms. The downside is that not all shops offer payment plans, and those that do may not offer the best rates.
The other possible downside is an additional charge. Since they are managing your financing and your repairs, they may charge more knowing they can add it to your payments. If your financing is separate, they don’t know whether you can afford more work/charges, etc.
Personal Loans for Poor and Fair Credit
|Lending Partner||Minimum FICO Score||APR Range|
|No Min||36% - 299%*||Apply|
|No minimum||36% - 199%*||Apply|
|600||15.49% - 34.99%*||Apply|
|600||5.99% - 35.89%*||Apply|
|No Min||35% - 155%*||Apply|
|580||9.95% - 35.99%*||Apply|
2) Unsecured personal loans
Check out our list of 65+ companies offering personal loans, complete with company descriptions, up-to-date rates, and real-user reviews.
Many lenders offer an easy online application process so you can find out within a few minutes if you qualify. Note that loan amounts, eligibility requirements, rates, and fees will vary from one lender to the next.
Upon approval, you will have a lump sum transferred into your bank account which you can use to pay for your car repairs. Then, you will repay the amount over a set term along with interest. The faster you pay it off, the less you will pay. Also, the better your credit, the lower your rates will be.
The pros of this option are interest rates are often lower, and loan amounts are higher than on credit cards. There are also many lenders, which makes for a competitive environment.
You can use SuperMoney’s loan offer engine to get personalized, pre-approved loan offers from several lenders in about two minutes.
The cons are that you will need fair credit to get approved, and good credit to get low interest rates. Also, look out for origination fees as some lenders charge them while others (like LightStream and SoFi) don’t.Featured lenders for personal loans
|Lending Partner||Minimum FICO score||Estimated APR|
|600||15.49% - 34.99%*||Apply|
|680||5.89% - 14.24% (with AutoPay)*||Apply|
5.49% - 14.29% APR (with AutoPay)*
4.98% - 11.44% APR (with AutoPay)*
|660||5.99% - 35.89%*||Apply|
|620||4.93% - 29.99%*||Apply|
|580||9.95% - 35.99%*||Apply|
|700||5.25% - 12%*||Apply|
3) Credit cards
Be sure to calculate how long you think it will take you to pay off the repairs and how much it will cost you to do so. Then, you can decide if the cost is worth it.
A few things to keep in mind are that some credit cards offer a warranty against bad repairs, which could be very helpful if something goes wrong. Also, several cards come with interest-free introductory periods ranging from six to 21 months.
That means you can pay for the repairs and won’t owe interest until the promotional period ends. If you can pay your balance off before the period ends, you don’t pay any interest!
The pros of credit cards are that it’s relatively easy to apply and get approved, you can pay with the card and don’t need to pull out cash, and introductory rates can help you save.
The cons are that you will need to have very good credit to get low interest rates. Also, the rates can jump up after the introductory period ends. So, if you don’t pay the repairs off in time, the interest could get expensive.
Lastly, beware of cash advance fees– it’s better to use the card than to pull out cash.
4) Home equity line of credit (HELOC)
If you own a home and have equity in it, you could consider gaining access to that equity through a home equity line of credit (HELOC).
Your home will undergo an appraisal. If approved your lite of credit will be equal to a percentage equity you have earned. For example, if you have $100,000 in equity and the lender allows 85% loan-to-value, your available credit line will be $85,000.
Once you open a HELOC, you will have a draw period which typically lasts about 10 years. You can withdraw money whenever you need it during that time, whether it be for a remodel, a wedding, or a car repair.
You will only pay interest on the amount you take out. After the draw period ends, you will enter the repayment period in which the lender splits the balance into payments over a set term.
The pros of this option are that it’s easy to get approved if you have home equity, as it’s a secured form of credit. The interest rates are typically very low, too (lower than personal loans or credit cards). It also allows you to have cash available if you need it. At the same time, if you don’t touch it, you won’t pay any interest.
The cons are that you need to own a home and have equity to qualify for this option. Further, your home will be at stake if you don’t repay the credit line.
5) Payday loans
Payday loans enable you to get money fast even with no credit or bad credit. Instead of performing a credit check, lenders just look at your income source and verify you have a bank account. If you don’t qualify for the other options and can’t borrow from friends or family, this can be your last resort.
The pros are it’s easy to get approved, and you will get the money right away. The cons are the interest rates are usually very high and the repayment periods are very short.
As a result, it’s not uncommon for people who take out payday loans to continue doing so; more than 80% of these loans are followed by another one within 14 days. This can create a reliance that is hard to get out of, but it may be better than having a car that doesn’t run.
Payday Loan Companies
|Lending Partner||Loan Amount||Credit Score Range|
|$100 - $250||450 - 650||Apply|
|$100 - $2K||300 - 700||Apply|
|$100 - $2K||300 - 700||Apply|
What is the best way to finance a car repair?
The best way to finance a car repair is going to depend on your specific situation and your preferences.
For example, if you have a home with some equity in it, HELOCs are a low-cost option that will ensure you have access to money when you need it. Personal loans are also a great option, as they’re easy to get nowadays and the many lenders enable you to get a better deal.
To decide what is right for you, consider each of the options above along with their pros and cons. Do a little research to find out how much each option will cost you. Then, pick the one that will be the best fit overall.
One of the easiest places to start is finding out what lenders will offer you. Click here to find out!