If you’re on the hook for unexpected vehicle repairs and don’t have money saved to pay for them, you may turn to an auto repair loan.
If you own a car, you’ll eventually encounter an auto repair that’s not covered by your vehicle warranty or insurance. That could mean a big bill, or being stranded without wheels
Without adequate savings to cover repairs, you’ll need to find the funds to get your vehicle back on the road. An auto repair loan is one solution for getting your vehicle fixed and running again. Here’s everything you need to know about this financial product.
What’s an auto repair loan?
An auto repair loan is any type of loan that can be used to pay for vehicle repairs — this is generally an installment-based personal loan.
With an auto repair loan, you’ll borrow a lump sum of cash that you can use to cover your auto repair bills. You’ll be responsible for repaying the loan monthly for a specific period of time, including interest at the agreed-upon rate.
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How do auto repair loans work?
When taking out a car repair loan, you can expect it to work the same as any other personal loan. Once approved, your lender will offer personalized loan terms. These dictate how long you have to repay the loan, what your fixed monthly payments will be, how much interest you’re charged and whether you’re allowed to repay the loan ahead of schedule without prepayment penalties.
Personal loans are generally unsecured. This means that borrowers don’t have to guarantee the loan with existing assets — also known as putting up collateral. But borrowers usually need to have good credit and a steady source of income in order to qualify.
Benefits of auto repair loans
If you’re facing a hefty bill from your mechanic, taking out an auto repair loan has some benefits:
- No collateral is required. Unlike many other loan products, personal loans for auto repair are unsecured. You won’t need to put up any collateral — such as your car’s title, home equity or savings account — in order to take out the loan.
- You’ll receive the loan in one lump payment. Your lender will provide you with the entire loan amount at once, so you can pay your repair shop and be on your way.
- Funding is generally pretty fast. Depending on the lender you choose, you may be able to get your auto repair loan funds as soon as the next business day.
- Interest rates are often lower than other products. Personal loan interest rates are generally lower than what you’ll find with credit cards or payday loans. Your actual rate will depend on your credit score, income and loan terms.