Car repairs can be costly. According to AAA, the annual cost to own and operate a vehicle is $8,698. Maintenance alone costs an average of $766.50 per year. If you need new tires, expect to pay $525 to $725.
If you’re going to a new mechanic and the repair estimate seems high, check the required repairs on the Consumer Reports Care Repair Estimator. This will give you an idea of how repairs should cost, so you don’t overpay.
It’s stressful when your car breaks down and you don’t have the money to pay to get it fixed, but don’t panic. Several options exist for financing car repairs.
Use a credit card for car repairs
How it works
Most auto shops accept credit card payments. You should use a card that pays you mileage or cashback to reap some benefit from the purchase.
If you have a credit score of 670 or higher, you can avoid interest by applying for a new card. Many credit card companies offer introductory periods with 0% annual percentage rates (APR) for applicants with high credit scores.
As long as you pay off the balance before the grace period (usually six to 18 months) ends, you won’t owe any interest. Before you use such a card, make sure that you can afford to pay what you owe before the introductory period ends. Interest rates on these card offers tend to skyrocket after the grace period.
If you have bad credit, it’s still possible to pay for your car repair with a credit card. The OpenSky Secured Visa Credit Card is designed for people with low credit scores. Worried you won’t qualify, and concerned that the credit inquiry will hurt your already low credit score? Good news: you can prequalify for this card without the lender checking your credit report.
But like other credit cards for bad credit, the OpenSky Secured Visa Credit Card features a fairly high-interest rate. The card also has an annual fee of $35.
Pros: Mechanics generally accept credit cards. If you can qualify for a 0% introductory APR, you can sidestep interest entirely. This will give you a chance to pay off the loan monthly and not strain your budget.
Cons: Fail to pay off the card with the 0% APR before the grace period ends, and you’ll pay high-interest rates on the remaining balance. And if you don’t have a good credit score, you’ll be hit with high-interest rates.
Apply for an unsecured personal loan
How it works
Unsecured personal loans are a reliable option for paying for car repair. You can apply for a personal loan at a bank or credit union, but online lenders tend to provide funds more quickly. You’ll often get an answer within minutes or hours, which will help if you need your car fixed right away.
With unsecured personal loans, interest rates are usually fixed. This means that your payment amount won’t fluctuate with the market, and your interest rates will stay consistent.
Loan terms often span two to three years, which makes for lower monthly payments. Remember, though, the longer you take to pay off the loan, the more interest you’ll pay on your car repair loan over time.
Pros: Online lenders could offer you fewer fees and more competitive rates than savings and loans and credit unions. Funding is generally quick, which helps when your car doesn’t work. Long loan terms can make it easier to afford your monthly payments.
Cons: It’s hard to get a personal loan with bad credit. If you do manage to get one despite a low credit score, expect to pay a high-interest rate on the money you borrow.
Try a pawn shop loan or a title loan for car repairs
How it works
If you need cash fast, a pawn shop loan may be a good option. These loans are quick and easy to get. You bring an item or items of value into a pawn shop; they appraise your valuables and give you a loan immediately based on the value of the items.
Pawn shop loans are secured — they require you to leave your possessions as collateral. This means that if you’re unable to pay off the loan, you could lose those possessions. Depending on state laws, the pawn shops may offer you an extension or renewal, which can give you more time to come up with the money. If you don’t have any assets you would want to hand over to a pawn shop, you can consider using your vehicle as security in an auto title loan.
Pros: You get your money right away. Because you provide collateral, the lender doesn’t have to check your credit, which is good if you have bad credit.
Cons: Since you’re putting your possessions up as collateral, you risk losing valuable items.
Take out a high-interest rate loan for car repairs
How it works
If you have no other option, you can apply for a payday loan or a title loan. These loan types feature extremely high-interest rates that can trap you in an unending, expensive cycle of trying to pay off the loan. As such, they should be an absolute last resort.
Payday loans, also called cash advance loans, let you borrow money from your next paycheck. The interest rates on such loans can run from 210% to 782% APR, with an average of 300% to 500% APR. Fail to repay a payday loan within 14 days, and the lender will roll the loan over, refinance it and add additional interest and fees.
With a car title loan, you use your car as collateral. They are short-term, high-interest loans charging an average of 300% APR. You can borrow 25% to 50% of the value of your car. Fail to pay this loan off and the loan rolls over, with additional interest and fees. If you don’t keep up with the payments, which can become expensive, the lender will sell your car, which would make the repairs a wasted expense.
Pros: High-interest rate loans are an option even if you have bad credit. You get the money instantly once approved.
Cons: Interest rates with these loans are prohibitively high. It’s very easy to get stuck in a payback cycle. With a title loan, you could even lose the car you just paid to repair. Unless you have a collectible or desirable car, there’s a chance that you won’t be able to get a car title loan on a malfunctioning vehicle.
The bottom line in car repair refinancing
So which financing option is right for you? If you have good credit and the budget to pay it off in time, consider signing up for a new credit card with an introductory period. However, if your credit is good but you need more time to make your payments, an unsecured personal loan is a great option.
Additionally, if your credit is low but you have valuable possessions, a pawn shop loan may be the best option for you. In the unfortunate case of having neither good credit nor possessions to use as collateral, you can consider a payday or car title loan. But be sure to pay your debts in time, lest they snowball into something you can’t afford.
Whenever considering financing options, research is an important first step. Take a look at SuperMoney’s Best Personal Loans Reviews and Comparison for more information before you make your choice.
Julie Bawden-Davis is a widely published journalist specializing in personal finance and small business. She has written 10 books and more than 2,500 articles for a wide variety of national and international publications, including Parade.com, where she has a weekly column. In addition to contributing to SuperMoney, her work has appeared in publications such as American Express OPEN Forum, The Hartford and Forbes.