For many Americans, a car is a necessity. Without a car, getting to work or school, buying groceries, or running other necessary errands may be difficult or impossible. Cars do break down, and repairs are expensive. If you don’t have the cash, auto repair loans can bridge the gap.
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Best Auto Repair Loans
Auto repair is an expense that arrives unpredictably and cannot be deferred: if you rely on your car, you need it now, not next month. Repairs can also be expensive. Auto repair loans provide an option if you need repairs you can’t afford.
Personal loans are the skeleton key in the credit toolbox: they can be used for almost any purpose. They are often the first choice if you need a loan to finance auto repairs.
These are some of the top personal loan options for auto repair.
|Lender||APR||Loan Amount||Loan term||Time to fund***||Minimum credit score|
|Discover Personal Loans||5.99% to 2.99%||$2,500 to $35,000||3-7 years||As early as the next business day||720|
|Axos Bank||7.15% to 17.99%||$5,000 to $50,000||3-6 years||As early as the same day||700|
|Lending Club||5.66% to 35.89%||$1,000 to $40,000||3-5 years||As early as 24 hours after approval||600|
|Lightstream||4.99% to 19.99%||$5,000 to $100,000||2-12 years||As early as the same day||660|
|Personalloans.com||5.99% to 35.99%||$250 to $35,000||3 months to 6 years||As early as the next business day||610|
|PenFed Credit Union**||7.74% to 17.99%||$600 to $50,000||6 months to 5 years||As early as the next business day||580|
|Prosper||7.95% to 35.99%||$2,000 to $50,000||3-5 years||As soon as 1 business day||600|
|Sofi||7.99% to 23.43%||$5,000 to $100,000||2-7 years||As early as the same day||680|
|Upgrade||8.49% to 35.99%||$1,000 to $50,000||2-5 years||Within 1 day of approval||560|
|Upstart||7.46% to 35.97%||$1,000 to $50,000||3-5||As soon as 1 business day||None*|
**Membership required for fund release
***Actual funding times may be longer in some circumstances
A personal loan will probably be your best auto repair loan option if you have reasonably good credit. The interest rate on a personal loan is based on your credit score. If your credit is good, you can get loans at rates that will probably be better than other financing options.
If your credit is in the fair or poor range, the interest on a personal loan may be quite high, making it an expensive option.
READ MORE: How to Get a Free Credit Score
A credit card is one of the fastest and easiest ways to finance an auto repair. It can also be a very expensive way. It can still be a good option under the right circumstances.
Existing Cards in Your Wallet
Check the cards that you already have. You’ll want to use the card with the lowest APR: credit card interest is high and compounds daily, so it can pile up a lot of debt quickly.
If your card has an APR of 15% (below average), and you charge a $2,000 repair and pay $50 a month, it will take 56 months to pay off and you will pay $780 in interest. If your APR is 20%, it will take 67 months and the interest will cost $1,300.
Also, consider your credit utilization: the percentage of your balance that you use. This significantly impacts your credit score, so try to use a car with a low balance, a high limit, or both.
Generally, using a credit card to finance auto repair is only a good idea if you can pay the debt off quickly.
New Card With a Low Introductory APR
If you’re in the market for a new credit card, a card with an introductory 0% purchase APR could be your answer. These cards offer up to 18 months or more without interest. If you paid off that $2,000 loan in 18 months, you’d pay about $115 monthly with no interest.
Be careful: With many cards, even a single late payment will cancel the promotional interest rate and put you back to paying high interest. These cards are also only available to people with very good or excellent credit.
Branded Cards from an Auto Supply Store
Some auto repair and auto supply outlets offer their own financing options. Like most auto repair loan options, these have both advantages and disadvantages.
Synchrony Car Care Card
Consumer financial services company Synchrony partners with a group of auto repair and parts shops, including Discount Tire, NSAPA Auto Parts, and Midas, to offer a co-branded card specialized in auto services. You can use the card for gas, maintenance, and repairs.
The Synchrony car care card offers a 6-month introductory zero-interest promotion. If you can pay your bill within that time frame, that’s a good deal. If you can’t, there’s a 29.99% APR that can become very expensive very quickly.
Unless you can take advantage of that initial promotion, this card is probably only worth using if you can pay your debt quickly, like on your next payday. You won’t want to carry a balance.
EasyPay Finance partners with businesses to provide financing for their customers. They partner with merchants, so you’ll need to find a repair shop that uses EasyPay. They will lend to borrowers with bad credit, but you’ll need to make at least $750 a month and have a bank account that’s been active and in good standing for 90 days.
EasyPay will lend up to $5,000 with no down payment and no credit check. They offer a short-term repayment plan that provides an interest rebate if you pay within 90 days, but you will pay a $40 processing fee.
Stay Away from These Types of Loans for Car Repair Financing
If you need your car badly, you may be desperate to find any possible way to finance necessary repairs. There are still some loans that you should avoid at all costs.
- Car title loans offer fast cash in exchange for the title to your car. Your car becomes collateral for the loan. Interest rates are typically around 300%, and if you can’t pay on time, you could lose your car completely.
- Payday loans provide fast cash with no credit checks. That sounds great, but the interest rates are astronomical and the pans are designed to trap you in a cycle of unpayable high-interest debt. Stay away!
These loans are designed to prey on desperate people with poor credit or no credit. They will almost always leave you in worse shape than you were when you started.
Is Your Vehicle Worth Repairing?
Buying a car is expensive, but owning an unreliable car is also expensive. Auto repairs cost money, often a lot of money. They are also unpredictable: you never know when a vehicle will break down.
When you add up the costs of owning that old car, you also have to consider the expense and hassle of finding an auto repair loan when you need it and the cost of potentially missing days at work or school. Older cars also tend to be less fuel-efficient, another cost.
A single repair may not be an issue, but if breakdowns are becoming regular, it may be time to start scanning Facebook Marketplace and other local sites for used cars in good condition. Shop carefully for both cars and loans!
Benefits of Auto Repair Loans
Most auto repair loans are personal loans packaged for auto repair use. These loans are versatile, and terms are often attractive, especially if you have reasonably good credit.
These loans have advantages.
- No collateral is needed: You don’t need to risk valuable assets
- Lump-sum payment: You get your money upfront and all at once
- Fast funding: Many personal loan providers release your money on approval, which can be as quick as the same day. That matters when you need repairs done fast!
Those advantages make auto repair loans a preferred choice if you have good enough credit. The one drawback is that it may be hard to get approved if you have poor credit or no credit. If you are approved, the interest rate will be high.
What Can a Car Repair Loan Cover?
A car repair loan can be used to pay for almost anything your car needs. Here are some of the most common needs.
- New tires
- Brake repair and maintenance
- Transmission repairs
- Windshield repair or replacement
- Electrical or sensor repair
- Engine tuning or repair
- Body repair or collision repair
You can even use your loan to buy gasoline, but if you’re borrowing money to pay for gas, you may want to reassess your finances.
Auto Repair Loan Application Process
If you’re considering using an auto repair loan to finance the auto work you need, follow these steps.
- Check your warranty. If the repairs are covered, you may not need a loan.
- Estimate your vehicle repair costs. AAA offers a good calculator, or you can ask several shops in your area and compare estimates.
- Check your credit report and your credit score. You’ll need that information to determine what loans you’re qualified for.
- Shop around and compare lenders: Compare interest rates, repayment terms, and any origination fees.
- Get prequalified. It’s always best to look for several prequalification offers.
- Pick the loan that works best for you. Check the details of the prequalification offers and choose the best option.
- Complete the application. There will be a credit check, so you may have to wait for approval. Many online lenders offer very fast approval.
- Get your funds and get your car repaired.
Getting the loan is only the start of the process. Be sure to make your payments on time. A good payment record will help your credit and make your next loan cheaper and easier to get. Missed payments will do the opposite!
Other Loan Options
You still have options if your credit isn’t good enough to qualify for an auto repair loan.
- Cash advance app: If the repairs you need are relatively small, an app like Brigit, Dave, or Albert can cover your needs. You’ll need to join the app before you need the money.
- Home equity loan or line of credit: If you own a home and have equity in it, these loans offer relatively easy approval and low rates. Be careful. If you can’t pay the loan back, you could lose your home.
- Get a co-signer to help you qualify for an installment loan: Be sure that both you and your cosigner understand the risks and responsibilities.
- Payday Alternative Loan: Many credit unions offer these loans, which are designed to help their depositors avoid or escape the payday loan trap.
There is no perfect loan, but if you understand your options and shop around, you can find the best one for you!
How should you handle your car repair? Financial guru Dave Ramsey offers his thoughts in this video:
The Bottom Line
Auto repairs are one of the fastest ways to derail your finances. Most Americans require cars to get to work and earn a living, so even a small unexpected repair expense can’t wait. And unfortunately, many families don’t have enough emergency savings to cover a large surprise expense.
But there are a few options, even if you have bad credit. Some of them are better than others, and one may already be in your wallet. The key is to compare methods to find out which will help you most and whether you meet the eligibility criteria.
An annual percentage rate or APR is the most effective way of comparing loan costs. The APR combines all loan costs, including interest and fees, into a single figure expressed as the percentage of the loan amount that you’ll pay for each year of the loan.
Buy Now Pay Later (BNPL) providers like Klarna, Sezzle, and Affirm all partner with auto repair providers, along with Sunbit, a new provider specializing in auto repair. You will have to find a shop that offers this option.
The Fair Isaac Corporation (or FICO) generates credit scores based on your records with the three major credit bureaus: Experian, Equifax, and TransUnion. Lenders use FICO scores to assess how likely you are to default. Your FICO score is a major factor in determining whether you get approved for a loan and what interest rate you’ll pay.