Ultimate Guide to Auto Repair Finance

Everything you need to know about financing your auto repair costs

Your car is broken, and you need it repaired ASAP. But the repairs are too expensive to pay in cash. Which financing option will be the cheapest and easiest?

This guide 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.

Considerations

There are a few things you should investigate before looking into financing.

First, can you get financial assistance?

If you can get financial assistance for car repairs, you should! Before turning to lenders, ask yourself the following questions:

Is your car under warranty?

If your car is under warranty, you may not need to pay for repairs at all. This is a best-case scenario. 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. In some cases, it even applies if the car changes owners.

If you bought your car new from the dealer, call them and give them your vehicle identification number (VIN). They can tell you if you are still under the factory warranty.

If you bought it from a private seller, on the other hand, you can check the warranty status on CARCHEX. You can also call the dealer and ask about the warranty for your make and model.

If you bought an extended warranty, be sure to find out if it covers the problem. And remember, many extended warranties are transferable. So if you bought your car from a private party, check your paperwork to see if you have one.

Do you have insurance that pays for mechanical breakdowns?

While typical collision and comprehensive car insurance won’t cover routine mechanical problems, certain auto 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 for specific car parts. When a problem occurs, just pay the deductible, take it to an approved mechanic, and your insurer will pay the mechanic directly.

If you have this insurance, it can reduce your out-of-pocket costs, eliminating the need to finance repairs.

Browse and compare car insurance providers 

Second, should you repair it?

When your car breaks down, your first instinct is to fix it. But in some cases, the damage is so widespread that the cost of repairing it exceeds the cost of replacing it. If costs are too high, it may be time to trade your car in and invest in a new one.

To determine if your car is worth repairing, you’ll need to consider several factors. How much do you owe on it, and how much is it currently worth? Do you pay a lot in month-to-month maintenance? Is the cost of repairs close to the value of the vehicle? How much would you have to pay for a new car?

If it is cheaper in the long run to get a new car, you may save yourself future troubles. But if your car is worth saving and you don’t have the cash to fix it, it’s time to turn to financing.

Financing auto repairs

Richard Reina, product training director for CARiD.com, says, “The cost to own and operate a car is upwards of $8,000 per year. 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) Finance through your auto repair shop

Your technician or auto shop may let you set up a payment plan for your repairs. In this case, you’ll get a set term over which you must pay back the amount with interest.

This route is especially advantageous if you’re struggling to qualify for loans from other lenders. You may also receive competitive terms and rates.

The downside? Not all shops offer payment plans, and those that do may not offer the best rates. It is also hard to confirm that you’re getting a good deal from your auto shop, since you can’t shop around.

2) Take out an unsecured personal loan

While lenders don’t typically offer specialized loans for auto repairs, you can get a personal loan and use the proceeds to repair your car. Personal loans are more accessible and affordable than ever before.

Check out our list of companies offering personal loans, complete with up-to-date rates and side-by-side user reviews.

In most cases, you can apply online to 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. Once you’ve used that cash to pay for your repairs, you’ll repay the amount (plus interest) over a set term. The faster you pay it off, the less you will pay. And the better your credit, the lower your rates will be.

Personal loans offer many benefits. Interest rates are typically low, and you can borrow large amounts of money. Also, a crowded ecosystem of online lenders makes for a competitive environment.

The cons? You’ll need fair credit to get approved, and good credit to get low interest rates. And watch out for origination fees. Some lenders charge them, while others (like LightStream and SoFi) don’t.

You can use SuperMoney’s loan offer engine to get personalized, pre-approved loan offers from several lenders in about two minutes.

3) Use a credit card

Credit cards are another option to consider. After using a credit card to pay for repairs, you’ll have to pay interest on your balance. Be sure to calculate how long 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, or if you’d rather pursue alternative financing.

Some credit cards offer a warranty against bad repairs, which could be very helpful if something goes wrong.

If you’re going to finance your repairs with credit, consider signing up for a new credit card offering an interest-free introductory period. If you’re able to pay off your debt during the introductory period, you won’t accrue any interest. But only take this route if you’re confident that you’ll be able to pay your balance in time. After the introductory period ends, your interest rates will skyrocket.

It’s relatively easy to apply and get approved for a credit card. They’re very convenient, and if you qualify for an interest-free card, you can save a lot of money.

However, you’ll need very good credit to qualify for low interest rates. And even if you do qualify for a temporary 0% APR, you’re bound to that introductory period. If something goes wrong and you’re unable to pay off the repairs 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.

Browse credit cards and compare their features side-by-side:

4) Use a home equity line of credit (HELOC)

If you own a home and have equity in it, consider leveraging that equity with a home equity line of credit (HELOC).

A HELOC is a line of credit backed by the equity in your home. If your application is approved, you’ll receive a credit line equal to a percentage of your home equity — typically 80% – 90%.

Once you open a HELOC, you can draw from that pool of credit for about 10 years. During that period, you can withdraw money whenever you need it, whether it be for a remodel, a wedding, or a car repair.

You will only pay interest on the amount you take out, though those interest rates will fluctuate with the market. After the draw period ends, you’ll repay your balance. This repayment is split into a series of payments over a set term.

Because HELOCs are secured, they’re easy to qualify for, and their interest rates are low. And HELOCs can help you to pay for ongoing repairs over a period of months or even years. Best of all, if you don’t draw money from the credit line, you won’t have to pay any interest on it.

However, HELOCs are not for everyone. To qualify, you’ll need to own your own home and have enough equity in it. And if you fail to repay the credit line, you could lose your home.

Browse HELOC lenders:

5) Get a payday loan

If you can’t qualify for a personal loan or a credit card, you don’t own your own home, and your auto shop won’t set up a payment plan, payday loans are a last resort.

They enable you to get money fast, even with no credit or bad credit. Instead of performing a credit check, payday lenders simply confirm that you have income and a bank account.

It’s easy to get approved for payday loans, and you’ll get the money right away. But they come with brutally high interest rates and extremely short repayment periods. If you don’t repay the balance quickly, it’s easy to get mired in ever-growing debt.

If you need a functioning car in order to get to work, it may be worth taking out a payday loan. But be cautious. Consider borrowing money from friends or family to pay it off promptly, lest you find yourself in an endless cycle of debt.

How should you finance your car repair?

The right financing option for you depends on your specific circumstances.

If you have a home with some equity, HELOCs are a low-cost option that give you access to money when you need it.

Or if you have good credit and qualify for low rates, personal loans are a great option.

Are your car repairs are cheap enough that you can pay them off within a credit card’s introductory period? Applying for a new card may get you the money you need, interest-free!

If you have no other options and your car’s repairs are crucial, consider a payday loan. But before you apply, make a plan for how you’ll pay off the loan before the end of the term.

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 would cost you. Then pick the one that suits you best.

Getting started

Ready to get started? One of the best ways to begin is to find out what lenders will offer you. Then, even if you use another financing method, you can compare your options to those rates to find the best deal.

Click here to compare rates from online lenders. It only takes a minute, and pre-qualifying for personalized rates won’t hurt your credit!

Get Competing Personal Loan Offers

Compare real offers from multiple lenders.

It's quick, free and won’t hurt your credit score