Car Repair Loans: What You Should Know

Car repair loans are an accessible way to reduce the upfront costs of critical automotive repairs. Especially for one-car families that rely on private mobility to get to work or get the kids where they need to be, putting off repairs simply isn’t an option. For many car owners, loans for car repairs are an excellent way to finance their repairs and build credit.

What is An Auto Repair Loan?

An auto repair loan is a financial product designed to pay for car repairs. These types of car repair loans come in many varieties, including secured and unsecured loans. The interest rates and repayment schedule will vary based on the amount you’re borrowing and your credit score.

Types of Auto Repair Financing

Before seeking out car repair loan options, make sure you contact your auto insurance provider to see if they’ll cover any portion of the repairs. This could reduce the amount of money you need to borrow and subsequently the amount of money you’ll pay in interest.

Some of the most common types of car repair loans are:

• Personal Loan

  • 12-60 months

  • 4%-46% APR

• Payday Loan

  • 2-4 weeks

  • 390%+ APR

• Title Loan

  • 15-30 days

  • 300% APR

Personal Loans for Auto Repair

Contact your local credit union or lending institution to see if a personal loan is right for you. Personal loans are considered installment loans, which means you’ll pay back the loan on a regular schedule determined by the lender. In most cases, this will be divided into monthly payments.  

What to Know

There are a few different ways to structure personal loans, so make sure you understand the exact type of loan you’re getting.

Secured vs. Unsecured Loan

Secured loans require collateral, which means you’ll agree to hand over something of similar value if you default on the loan. In most cases, this will be the car itself, but it can be anything of similar or equal value. Unsecured loans don’t require collateral.

Principal Amount

The principal loan amount is the total amount of money you’re borrowing; it’s the amount you’ll own before adding in interest or fees.

Loan Fees

Processing and origination fees increase the amount of money you’ll need to pay and vary based on the amount you’re borrowing, the lending institution and other factors. You may also pay additional fees for late payments or if you pay off your loan early.

Interest Rate and APR

The interest rate is the percentage charge on the amount borrowed. Annual percentage rate, or APR, is the interest rate plus any applicable fees. Your interest rate is primarily influenced by your credit score, although broader economic factors like the federal funds rate and money supply also play a role.

Repayment Period

This is the expected timeline for paying back the loan in full. Most personal loans are between 12-60 months and vary based on your loan amount, monthly payments and other factors.

Payday Loans

Payday loans are cash or check advances designed to give you money before your next paycheck. This is the fastest way to get money, but they come with substantial risks.

Payday loans typically have very short repayment periods measured in days or weeks, not months. They also tend to have astronomical interest rates of 300% or more. Some financial experts consider payday loans predatory; unless you have no other way to access money, we recommend steering well clear of payday loans.

Title Loans

Title loans usually require the borrower to exchange their car title for the loan. Most title loans are due within 15 or 30 days and changes exorbitant interest rates of 300% or more. Like payday loans, title loans blur the lines between lending and predation; avoid title loans unless it’s absolutely necessary.

Related: What is the Cost of Car Ownership?

What Can Auto Repair Loans Cover?

Accessing funds through a personal loan or alternative, the money can be used to make almost any repair. From replacing parts, fixing windows or buying new tires, the loan can help you get back on the road fast.

Fast Automotive Repair at a Fair Price

Count on Garfield Automotive Service Center to provide reliable maintenance and repairs. We work hard to get Northern Michigan families fixed up and mobile. With a dedicated and experienced team of technicians, you’ll get old-fashioned customer service and car repairs done right the first time. Schedule your appointment today!