Auto Repair Loans: Are They Worth It?

Tara Seboldt
Jan 21, 2022

Expensive car repairs are an unfortunate part of car ownership for many drivers. They also tend to be unexpected. If you’re facing an emergency car repair, it’s easy to feel overwhelmed and worry about how you’ll pay the bill. The good news is, you might be able to finance your repairs with auto repair loans. Read on to learn more about these loan options and find the best solution for your repairs.

Get up to $500* for car repairs. (Or anything else.)

What is An Auto Repair Loan?

Emergency auto repair loans offer financing for car repair bills. Essentially, you borrow money from a lender to pay for the repairs made on your car. Then, you pay back your lender over time.

The loan amount, length of term, monthly payments, and interest rate can vary between loan lenders. Some common lenders who offer car repair financing include:

  • Banks and credit unions
  • Mechanic shops (usually as a branded credit card or via a payment plan)
  • Online lenders
  • Credit cards

Most car repair loans are a type of personal installment loan, which is different than a payday loan.

Payday loans are short-term loans with a single repayment date based on the day you get paid. They tend to have very high interest rates and fees, and can easily lead to a cycle of debt.

Personal loans and installment loans for auto repairs give you the chance to repay your loan over time.

For example, Possible Finance offers installment loans for auto repairs. You can apply for up to $500 which can be paid back in four payments.

Worried about less-than-perfect credit? Possible Finance doesn’t check your credit score when determining your eligibility for a loan.

Are There Auto Repair Loans for Bad Credit?

You may be asking: Can I get a loan to repair my car if I have bad credit? Yes, you can get auto repair loans with bad credit, just like any other bad credit auto loan.

Bad-credit loans are usually personal or installment loans. Lenders who offer these loans often specialize in lending to bad credit borrowers.

However, make sure to weigh the pros and cons of car repair loans for bad credit to make sure they’re a good fit.

Advantages to bad credit loans include:

  • They often have an easy approval process.
  • Some lenders have no credit check.
  • Many lenders offer fast approval—which is important in a car repair emergency.
  • There’s an extended repayment timeline, often one year or more. This gives you plenty of time to pay back your loan.
  • Making on-time payments could help improve your credit score over time if your lender reports to credit bureaus.

However, bad credit car repair loans aren’t a perfect solution.

Consider these drawbacks before signing up for loans for borrowers with bad credit history:

  • Loan terms like interest rate and fees for bad credit loans are almost always much higher than other financing options.
  • You might get into a worse financial situation by getting approved for a loan you can’t afford.
  • The extended repayment period and higher interest rate mean the total cost of the loan will probably be a lot more than other types of loans.

Emergency Auto Repair Loans

What can you do if your car needs repairs right now? Emergency car repair loans let you cover unexpected repairs.

Credit cards, payday loans, and repair shop payment plans are common types of emergency repair financing.

Like bad credit loans, emergency repair financing has benefits and drawbacks. You might consider an emergency auto repair loan because:

  • They offer fast financing to cover immediate repairs, sometimes as soon as the next business day.
  • They’re usually easy to apply for, such as filling out an application at your auto shop.

Emergency auto repair financing may not be the best fit for your situation, however.

Drawbacks to emergency loans include:

  • You often need good credit to be approved.
  • You may have to accept less than ideal terms, including higher interest rates or more fees.
  • The repayment period is often shorter than personal loans. For example, you’ll likely need to pay back a credit card within a month to avoid expensive interest charges.

Auto Repair Loan Alternatives

Emergency repair loans and loans for bad credit aren’t the only options if you’re facing a car repair bill.

Auto repair loan alternatives give you more options to customize your financing to meet your financial situation.

Alternatives include:

  • Bank personal loans
  • Payday loans
  • Paycheck advances
  • Credit cards with low intro rates
  • Installment loans, such as a loan from Possible Finance

Should I Get a Loan to Repair My Car?

Before you decide if you should get a loan to repair your car, you have to decide if it’s worth repairing. Cars don’t last forever, after all.

You might be better off trading in your car and getting a loan to buy a new (or new-to-you) vehicle, instead.

How should you decide if it’s better to trade in for a new car or repair your current one?

Start by looking at the benefits and disadvantages of each.

Benefits of New or Reliable Used Cars:

  • No immediate repairs needed
  • Purchase usually includes warranty protection
  • Newer cars tend to be more reliable
  • Potential qualification for new-car financing options, such as a lower interest rate

Disadvantages of Purchasing a New Car:

  • Long-term financial commitment
  • The need for great credit for the best financing offers
  • Costs of registering and titling the new car
  • The hassle of researching and shopping for a new car
  • Likely insurance rate increases

Benefits of Repairing Your Existing Car:

  • Quicker than shopping for a new car
  • Insurance premiums stay the same
  • Almost always less expensive than buying a new car
  • A short-term financial commitment

Disadvantages of Repairing Your Car:

  • May need additional repairs soon
  • Repairs may cost more than your car is worth
  • Repair loans may have higher interest rates or fees than new car loans
  • Not all repairs are covered by a shop warranty

Remember that buying a new car is a big financial decision. You don’t want to rush into it.

Everyone’s financial and repair situation is different. A good place to start is to compare the cost of repairs with the value of your car.

You can use resources like Kelley Blue Book to estimate the current value of your car.

For example, your car needs a new transmission and the mechanic’s shop quoted you $5,000 to replace it.

You look up the value of your car by comparing it to others for sale in your area and Kelley Blue Book guides.

The current value for your vehicle in good condition is $3,000. This means the repair costs are more than the car might be worth.

Of course, this doesn’t mean you should rush out and buy a new car. The value of your car versus the repair costs is just one factor in determining if you should repair the vehicle.

Covering Car Repairs

If you drive a car, there’s a good chance you’ll face auto repairs at some point. Whether you need expensive maintenance work or an emergency repair, auto repair loans could be an option.

Make a plan before you choose how you’ll pay your auto shop. Consider all of your financing options to find what works best for you.

You should aim to cover your car repairs with a loan that sets you up for future financial success—not one that encourages you to take on extra debt.

Don’t let your auto shop pressure you into a financing option that doesn’t fit your situation.

Tara Seboldt

Tara is a financial writer with over five years of professional writing experience. She previously worked at a financial planning firm. Tara uses this professional experience to help readers better understand their finances and make smart financial moves. When she’s not writing about money, Tara enjoys spending time in the Idaho mountains hiking, camping, and skiing.

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