Cars have long become a necessity, and many people use them daily. With regular maintenance, your four-wheeler will serve you well for a long time. However, this doesn’t mean it won’t break down eventually, even if your vehicle is almost new. In case you don’t have an emergency fund for car repairs, you may be in trouble.
In case your vehicle is damaged in a traffic accident or by someone else’s fault, the insurance will cover its restoration. This is stated in your insurance policy, so after filing a claim, your insurer will pay for repair expenses. But damage compensation is a process that can take weeks, even months, and you need your car fixed as soon as possible.
Regardless of why and how your vehicle broke down, one thing is certain – the repair can be quite expensive, but it’s necessary. In case you don’t have enough money to bring your vehicle back to driving condition, getting a loan for reparere bil can be a solution to your problem.
What Is a Car Repair Loan?
A car repair loan is a way to get the money you need to fix your four-wheeler. These can be standard personal loans you can use for this purpose or dedicated arrangements. If the lender agrees to lend you money, you get a lump sum to cover the costs of going to a mechanic, regular servicing, and all other necessary repairs.
In general, you don’t put collateral when borrowing money for car repairs. Most often, the sums involved are several thousand dollars. The repayment period for these financial arrangements can be up to several years. These deals can be quite flexible, so everyone can find a loan for themselves.
Car repair loans can be more or less favorable, depending on many factors. The interest rate is the same as for all other personal loans, and it will depend on the amount you borrow, the repayment term, and your creditworthiness. You return the borrowed money in installments over the pre-agreed period.
How to Choose a Car Repair Loan
The offer of car repair financing methods is diverse because lenders can customize their deals to everyone’s needs and possibilities. But you have to think about whether that offer is always the best for you. Being eligible to borrow money doesn’t mean you should do that at any cost. You should get a loan only when necessary and when you have no other way to pay for vehicle repair.
Know Your Needs
The golden rule of borrowing money is to borrow only as much as you really need. Anything beyond that will be an unnecessary expense that increases the debt you need to pay back. That is why you must be clear on how much you need to borrow. Before applying for a loan, check with your mechanic how much car repair will cost.
Many factors affect how much a vehicle repair will cost, so ensure you get several opinions. When you get the final figure, consider whether you will borrow the entire amount or cover part of repair costs on your own.
It’s good to borrow just a little more than the repair amount, just to have enough money in case of cost changes. If you have money left over after paying all expenses, repay it to the lender as soon as possible.
Know Your Standings
If you have good credit, you’re more likely to get a loan and a favorable interest rate. A good credit score speaks in your favor and marks you as a “risk-free” borrower. Assuming that you will behave responsibly towards your financial obligations as before, they grant you a lower interest rate than borrowers with a bad credit score.
Also, you need to assess your finances and budget. Based on that, you’ll know how much monthly installment you can afford. If you want to pay off the debt as soon as possible, go with higher monthly payments. In case you need to fit these installments into your already tight budget, a better option is a longer-term arrangement with lower monthly installments.
Consider Borrowing Costs
Lenders don’t give money out of pure altruism because it’s a business that brings them profit. It means that the car repair loan carries certain costs. These are interest and various fees. These costs aren’t set in stone, but lenders determine them. Some might offer lower interest than competitors, while others can waive origination or application fees, etc.
Interest on car repair loans generally goes up to 36% for unsecured financial arrangements. The most expensive option can be a payday loan, a small loan of up to a few thousand dollars, for which you can apply and receive it the same day. Its repayment term is very short, from two weeks to a couple of months. That’s why this deal carries the highest APR – up to several hundred percent.
When you know the borrowing costs and find lenders that offer a repayment term that suits you, you can compare several offers and choose the most favorable one. Then, you can prequalify at selected lenders to check under what conditions you can borrow money. If you find an offer that suits you, the next step is to fill out the application.
How to Apply for Car Repair Loans
After determining how much money you need, you should compare several deals and pick the one that suits you best. Next, research the lenders and their offers, as we’ve already explained. Handy tools such as online calculators can help you with this, as they can do the math and find the best car repair loan in just a few clicks.
Before deciding where to borrow money, check the lender’s reputation and track record. If everything is okay and the lending provider is reputable and legitimate, go to their website and fill out the application. Most likely, they’ll ask you to submit documents like an ID and a bank statement, so have them in digital forms.
After the lender receives your application, they perform a credit check. That’s supposed to determine your creditworthiness and the ability to afford a car repair loan. Based on that, lenders decide whether to approve or reject your application and what lending conditions to offer you. Keep in mind that this credit check can affect your credit score, so apply only for offers for which you’re qualified.
Since the loan is approved, the final step is transferring money to your account. In the case of personal loans that you’ll use for car repair, the funds will be available in two or three days, depending on your bank. If you’re lucky, lenders can complete the entire procedure and deposit money into your account the next day.
Alternative Car Repair Financing
We’ve already mentioned personal loans and their less desirable variants, such as payday loans, as methods of financing vehicle repair costs. There are several other ways you can pay for mechanic’s services, such as getting a title loan, using a credit card to cover these expenses, and borrowing money from a credit union.
Borrowing from Credit Union
Credit unions can help you finance car repairs. When joining the union, you must meet certain requirements, and as soon as you become a member, you can apply for favorable financing. Credit union loans usually have a low-interest rate and fewer fees, and they’re available even though your credit score isn’t stellar.
Title Loan
This can be a solution when you need more money. You borrow against your vehicle’s title up to 50% of its value. You can use that money for car repairs or anything else. Given that it’s a short-term arrangement (tenure is a month or two at most), a title loan carries a high-interest rate, regardless of the collateral you pledge.
Credit Card
Credit cards are a convenient but expensive solution for financing car repairs and regular servicing. The interest rates for these credit lines are over 20%, and you have to pay the monthly balances in full to avoid financial difficulties. In case you opt for a cash advance, you’ll also be charged transaction fees.
Your vehicle can break down when you least expect it. In case you don’t have enough money to cover repair costs, you have to resort to loans. It can help you solve this problem and unburden your budget, as long as you repay this debt on time.
