The TOP 3 Car Repair Loans - Check rates for 2020

What is a Car Repair Loan?

Car repair loans are personal loans that are used for the purpose of paying for automobile maintenance and repairs. While there are no specific “car repair loans”, many lenders will extend personal loans expressly to help you pay for need repairs on your car. These loans are also short-term and have more accessible rates than credit cards offer.

Should You Use a Car Repair Loan?

Knowing if you should look for car repair financing will largely depend on a few factors and circumstances. The first factor to consider is whether you have the budget available to pay back a loan (even if it’s a small, short-term one). If you can set aside enough every month to pay for it, a loan can help you get your car repaired quicker and have a minimal impact on your life.

The second aspect to evaluate is your existing amount of debt. If you’re in the clear, or even if you have a small amount, adding a small personal loan won’t impact you too much, and it can help you get back on your feet quickly. Additionally, sometimes you may be able to find other ways to finance your car repairs, such as insurance.

Finally, using auto repair loans is a question of whether you really need it for the amount you’re going to require. A personal loan is great because of the flexibility in amounts it gives you, but if your repairs are minimal, a loan may still be more than you need, giving you unnecessary debt. In that case, you may be better served using other financing methods such as a credit card.

Our Top 3 Car Repair Loans

Amin. fee: 1.5% - 6%.
Annual income of $30,000
Min credit score of 600
Accept Co-signers
Hardship plans
Credit health tool

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No fees
Low interest rate
Fixed Rates
Min credit score of 680
Unemployment protection
SoFi member benefits

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Administrative fee: 4.75%
Annual income of $20,000
Min credit score of 580
Failed payment fee: $15
Day of Grace: 10 days
Grace period fee: $25

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Advantages & Disadvantages of Car Repair Loans

Pros:

Car repair loans tend to have fast approvals and can give you your funds in as little as one business day
Borrow what you need and not a dollar more thanks to low starting loan minimums and flexible amounts
Take advantage of generally lower interest rates and fees than credit cards or traditional loans
Quickly pay off loans with short repayment terms and no prepayment fees in many cases

Cons:

You’re still accumulating debt, which can harm your finances long term
If you don’t have a good credit score, you may not have access to the best available interest rates
Some lenders charge high origination fees

How To Qualify for a Car Repair Loan

To qualify for the best auto repair loans, there are some factors you should consider before applying:

Make sure your credit score is high enough. Although many lenders set the minimum at 600-630, these scores will likely preclude you from the best available rates. Aim to have the best score to get access to higher amounts, better terms, and lower rates.
Have a steady income, or the promise of one. Lenders care if you can meet your monthly obligations, and having evidence of your income, or the guarantee of employment in the near future, is a big plus when looking at your application.
Keep your existing debt-to-income ratio low. Lenders are also interested to know how much of your monthly income goes to debt payments. A lower ratio (under 40%) is a good indicator that you can afford to add a little more.

How To Get the Best Rate?

Even though many companies offer auto repair loans for bad credit, you should aim to get the best possible rates available. To do so, you’ll need to make sure that you not only meet the minimum requirements but are comfortably beyond them. The first step is to audit your credit score and find ways to improve it (via fighting erroneous items on your report, building a better payment track record, and more). While 630 is somewhat standard as a minimum, your goal should be to get as close to 700+ as possible to access prime interest rates.

Additionally, reducing your debt-to-income is important. 40% is the accepted ratio for most companies, but you should aim to have it as close to 0% as possible, or at least at the 20% mark if you can. This means you can access a greater loan amount, and likely better repayment terms as well.

Car Repair Loan Alternatives

If you prefer not to take on additional debt with emergency car repair loans, you can still find financing if you need through other means:

Credit cards: While they have slightly higher starting interest rates, credit cards also give you significantly greater amount flexibility, let you make much smaller payments without having to borrow more than you need.
Cash-Out Refinancing: This type of financing uses your existing assets to give you a new line of cash (in this case your car) by offering a loan that exceeds their value. This may help, but it takes longer to get approved, and is a longer-term commitment with collateral.
Title loans: This is only recommended if your credit score is too poor for traditional financing. These loans use your car’s title as collateral, risking your vehicle if you fail to pay.
Friends and Family: In the end, you may have luck and your friends or family may be able to lend you the funds at no interest rate so you can avoid debt later on.

Bottom Line

Auto repair loans are a great and easy way to get out of a tight spot when your car is broken down and you need a quick fix. Although they’re not recommended in every case, they can help you get back on your feet and avoid being carless for long enough to harm your finances. Before applying, make sure your finances are at the best place possible, and find other forms of financing before taking on new debt.