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Guide to Loans for Car Repairs

Complete Guide to Using a Personal Loan to Finance Auto Repair Expenses
Kelly Boyer Sagert
Kelly Boyer SagertUpdated June 6, 2023
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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
Car repair loans — do they exist? They do!  Personal loans can be used for a variety of purposes, including repair work on your car. Read on to learn why a personal loan for car repairs can make sense; how to get a loan; alternatives to personal loans; and more.

Why Get a Personal Loan for Car Repair? 

Here’s how a personal loan for car repairs works: A borrower applies for a loan from a lender for a certain dollar amount. Once a loan is approved, the funds are provided to the borrower in a lump sum, and the borrower repays the loan in regular monthly installments. Payments are based on the interest rate charged and the loan’s term. Personal loans are flexible and can be used for virtually any purpose, whether you need a loan to move across the country or loans for car repairs.Key benefits of personal loans include these three:
  • Fast funding
  • Money given in a lump sum
  • Usually requires no collateral
Here’s more about each of the benefits of personal loans.

Fast Funding

If car problems are keeping you off the road or causing challenges when you drive, you’ll want a quick solution. A personal loan for auto repair can be ideal because you can often get the funding within days, especially with a lender that operates online. What follows is more information about quick personal loans

The Money Is a Lump Sum 

A personal loan for auto repair is approved for a certain dollar amount and then disbursed all in one lump sum. This allows you to pay for the current auto repairs and, if you’ll have bills from more than one repair shop, you can use your loan amount to pay each of them. 

Usually Requires No Collateral 

Typically, personal loans are unsecured, which means that you don’t have to put your car up for collateral (or anything else when it’s an unsecured loan). If you can’t repay your loan on agreed-upon terms, the lender therefore can’t repossess any collateral (although there would still be significant financial/credit score consequences). Recommended: Are Personal Loans Available for Uber Drivers?

Personal Loans vs. Mechanic Financing

If your car needs emergency repairs, and you’re wondering, car repairs loans, do they exist?, the good news is that they do. You could take out a personal loan for auto repair. Can you finance car repairs? Yes, you can. For instance, you may be able to get financing from the mechanic who works on your car. Auto repair shops sometimes partner with lenders or credit card issuers to offer financing to customers.Here’s a look at the differences between personal loans for car repairs and mechanic financing and pros and cons of each option.
Personal LoansMechanic Financing
Pros• Low rates• Loan terms may range anywhere from 12 to 84 months• Convenient• May be easy to qualify for
Cons• May need good credit to qualify• There may be loan fees• May have high APRs• Loan terms might be short

How to Get a Personal Loan for a Car Repair in 4 Steps

If you’re interested in loans for car repairs, these are the personal loan requirements lenders generally have:
  • Good credit scores: In general, lenders offer better interest rates when an applicant has a higher credit score because this indicates that they can be responsible with debt management, which makes them less of a risk for the lender.
  • Proof of income and employment: Financial institutions also typically want to verify that you have steady income and that it will be adequate to pay your debts, including the personal loan for car repairs.
  • Debt-to-income ratio (DTI) that fits within their guidelines: The DTI compares your gross monthly income (pre-tax) to monthly debt payments with lower DTIs preferable to higher ones. To calculate yours divide your total monthly debt payments by your monthly income and that percentage is your DTI ratio.
High-level steps to get a personal loan include the following:

1. Research and Compare Lenders 

Lenders have plenty of leeway in their personal loan programs. During your research, check the interest rate and APR; applicable fees; and loan term. What would your payment be? How long do you have to repay the loan? Are the penalties for paying car loans off early? Make sure to find out the answers to these questions.Also, be sure that you can borrow the amount you need with a personal loan for auto repairs; how quickly you can get the money (and if that timeline is workable for your situation); and whether you’d be required to put the vehicle up as collateral (secured personal loan) or not (unsecured personal loan). Comparing personal loan rates and terms can help you find the best options for your needs.

2. Select the Loan Option You Like Most 

After you’ve compared your options for loans for car repairs, prioritize them and then decide which one is at the top of your list. Find out how you’ll need to fill out the application (online, for example, or in person). 

3. Complete the Application 

You’ll need to fill in personal information, such as your name, date of birth, Social Security number, address, and phone number. You’ll likely need to prove your identity through a driver’s license or other state-issued ID, and perhaps another form. You’ll probably need to verify your employment and income and provide proof of your address. 

4. Get the Money 

With a personal loan, you’ll typically receive your funds in a lump sum, which you can use to pay for your car repairs. Then, you’ll start making your loan payments monthly.

Alternatives to Getting a Personal Loan for a Car Repair 

Can you refinance car repairs by other means? Yes. Although there are benefits to a personal loan for auto repairs, other options do exist. Other types of auto repair loans include:Here’s more about each option. 

Payday Loans 

If you’re short on cash now but expect to have the money to pay for repairs soon, you can explore payday loans. Payday lenders will offer funds for a short amount of time, often based on how much you earn. Note that these loans almost always come with very high interest rates.

Credit Cards 

If you have a credit card or plan to apply for one, it's possible to pay for your auto repairs this way, if it fits within your credit limit. If your credit card offers rewards or cash back points, this can be a plus. If you exhaust the money on your card, however, your credit rating could suffer. Note that credit cards typically come with higher interest rates than personal loans. 

Auto Equity Loan 

If you’ve got equity in your vehicle, you may be able to get an auto equity loan, which is a form of refinancing. If the car is paid off, then its equity is equal to its current value and a lender may allow you to borrow up to a certain percentage of that value. If there’s still a loan on the vehicle, then the equity is the value minus the loan. You may get a better interest rate on this kind of loan but, if payments aren’t made, then the vehicle could be repossessed.Recommended: Horse Trailer Financing

Personal Loan Rates From Lantern 

Car repair loans can help you get your vehicle fixed and running again, and options to consider include a personal loan for car repairs. At Lantern, you can fill out one convenient application and compare personal loan rates by lenders.

Frequently Asked Questions

Can you use a personal loan for car repairs?
Where can you get an auto repair loan?
Can you get an auto repair loan with bad credit?
What to do with a car you can't afford to fix?
Can you refinance a car loan to make repairs?
Photo credit: iStock/sefa ozel

About the Author

Kelly Boyer Sagert

Kelly Boyer Sagert

Kelly Boyer Sagert is an Emmy Award-nominated writer with decades of professional writing experience. As she was getting her writing career off the ground, she spent several years working at a savings and loan institution, working in the following departments: savings, loans, IRAs, and auditing. She has published thousands of pieces online and in print.
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