Understanding Auto Repair Financing: Options and Alternatives

A man adjusting the lugs on a car tire.

When faced with unexpected car problems such as faulty brakes and suspension issues, auto repair financing can offer you a much-needed lifeline. Whether in the form of title loans, credit cards, or mechanic financing, these options spare you from making out-of-pocket payments, making unforeseen costs more manageable. 

Let’s go over some car repair financing options for when you find yourself in a pinch.

Auto Repair Financing: What Are Your Options?

If your insurance doesn’t apply to specific repairs or your warranty has expired, you can always turn to auto repair financing. Here are some of your options: 

Bank Loans

Securing a bank loan is a popular choice for those seeking auto repair financing. It allows you to borrow money and repay it over several months or a few years, easing the strain of unexpected expenses. 

Whether or not you qualify for a bank loan hinges on factors like your credit score and history. Additionally, your loan limit is tied to similar factors, meaning the approved amount may or may not sufficiently cover the cost of repairs. 

Although banks generally have lower interest rates, it’s worth noting that loan approval isn’t always guaranteed. Compared to other options, traditional loans often come with more stringent requirements. 

Online Personal Loans

If you find your bank’s requirements too restrictive, getting a personal loan through an online lender can be a smart choice. Personal loans can address the financial needs arising from unforeseen car repairs. 

Online loans not only offer convenience; they’re also more accessible than traditional options. Operating with fewer regulations than banks, online lenders offer you the opportunity to take out a loan even if you don’t meet conventional criteria. This means securing auto repair financing is possible even with a less-than-ideal credit score. 

Furthermore, online lenders are known for their flexibility, tailoring their loan terms to better align with your situation. Online personal loans are also unsecured, eliminating the need to put up your car as collateral. 

Car Title Loans

This short-term loan allows you to borrow money (usually 25% to 50% of your car’s value), with a repayment window of 15 to 30 days. As long as you own the vehicle and can guarantee its lien-free status, a car title loan can be an attractive auto repair financing option, especially if you need cash ASAP.

As a secured loan (where an asset serves as collateral), a car title loan shortcuts the application process by eliminating the need for extensive background checks. While lenders may still evaluate your ability to pay by verifying your employment, the fact that you’re willing to pledge your vehicle is already a sufficient reassurance for most institutions.

Should you fail to meet your payments, your lender retains the title to your car, granting them the right to repossess it—a measure that reduces risk on their part. This risk mitigation often translates into lower interest rates, minimizing your overall financial obligation.

Existing Credit Cards

If your credit card has a high limit, it can be a valuable tool for auto repair financing. Simply swipe your card at the auto repair shop and pay the balance over several months. 

However, it’s important to be aware that most credit card companies charge Annual Percentage Rates (APRs) on outstanding balances each month. To avoid accruing interest on a card you currently own, you’ll need to clear your balance in full at the end of each billing cycle. 

New Credit Card with a Low APR

Alternatively, you can explore the auto repair financing option of opening a new credit card. As a standard practice, many credit card issuers offer new customers a low—sometimes even 0%—APR for the first 12 to 21 months. This translates to little to no interest in your car repair expenses, even if you make only minimum payments. 

Dealership or Mechanic Financing

Some car mechanics and dealerships offer their own auto repair financing. This can come in the form of repayment plans via their partner lending institutions, or a branded credit card—a card that can only be used in that particular shop.

Choosing to finance your car repair directly through your dealership or car mechanic can be a convenient choice. It offers a single point of contact for repairs and processing your financial paperwork. However, this convenience may come at the cost of marked-up interest rates from dealerships hoping to make a profit.

Alternative Solutions for Financing Car Repairs

In addition to auto repair financing, consider exploring these alternatives to cover your expenses:

Use Your Emergency Savings

If you’ve set aside some rainy-day money to prepare for unexpected costs, now is the time to tap into it. Leveraging your emergency funds can help you cover the entirety of repair costs, or at the very least, reduce the amount you need to borrow from banks or online lenders. 

Borrow From Family and Friends

Seeking financial assistance can be difficult, but it may be your best option, especially if you’re uncertain about meeting payment deadlines. If your mechanic’s estimated repair costs are minimal, consider borrowing money from loved ones with extra cash. Just make sure to pay it back to avoid ruining your relationship—remember, unpaid debts can lead to awkward Thanksgiving dinners! 

Factors to Consider When Choosing Auto Repair Financing

By choosing car repair financing, you can get your vehicle back on the road without draining your bank account. In choosing the best strategy for your situation, be sure to consider these factors:

Interest Rates 

As you evaluate auto repair financing options, always take into account the total amount you’ll pay—principal plus interest. Some loans, despite their low monthly payments, may ultimately lead to higher costs due to their steep interest rates.

Repayment Terms

Choose auto repair financing you can confidently settle when it’s time to pay up. Whether you’re opting for an auto repair loan or charging expenses to your card, prompt payments can help you work toward getting an 800 credit score

Length of the Application Process

If you’re Googling “fix now, pay later auto repair near me” in your desperation to swiftly restore your car’s functionality, prioritize options with short waiting times. Personal loans from online lenders, for example, have straightforward processes to facilitate same-day approvals. In certain cases, your money may even be released within minutes of your loan’s approval. 

Finance Your Auto Repair with Payment 1

From securing a loan to dipping into your emergency fund, there are plenty of ways to finance your car repair. These options offer the support you need, ensuring you restore your car’s functionality without overburdening your wallet. 

At Payment 1, we believe that financing car repairs should be a stress-free experience. Should your savings fall short of covering the costs of repairs, we’re ready to provide you with loans tailored to your circumstances. Not only can you define your budget, but you’re also free to spread out your payments across a timeline that works for you. 
Whether you’re dealing with minor inconveniences or disruptive car issues, we won’t leave you stranded. Reach out to us today to explore your auto repair financing options.