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Many consumers don’t have enough in savings to cover unexpected auto repair costs. Thankfully, several lenders offer car repair loans for bad credit.
These loans are typically unsecured and require proof of income. Lenders may also run a credit check. Getting prequalified is often easy and convenient. This allows you to compare loan terms without hurting your credit score.
Personal Loans for Auto Repair
If you need to make expensive but necessary auto repairs, a personal loan may be the best way to finance them. Personal loans typically offer fixed interest rates and monthly payments, which makes them easier to budget. Some lenders even allow you to repay the loan early without any prepayment fees.
While there are special car repair credit cards and title loans available, these options often come with high interest rates. You may be able to avoid paying interest by applying for a 0% introductory APR credit card, but be sure to pay off the balance before the promotional period ends.
Personal loan https://best-loans.co.za/lenders-loan/qwiekfin-personal-loans/ lenders offer both secured and unsecured loan options. If you apply for a secured loan, the lender will require that you put up your vehicle’s equity as collateral. In this case, you will usually be able to borrow up to a certain percentage of the current market or blue book value of your vehicle.
Secured loans generally require a credit check and you will need to provide proof of income and other relevant documentation to qualify. Some lenders also have minimum loan amounts and maximum borrowing limits based on your credit score. You can compare personal loan rates quickly and easily using a free online tool like Credible. Just enter the amount you need to borrow and your credit score to see which lenders can prequalify you for a personal loan to cover auto repair costs.
Store Credit Cards
Many auto repair shops offer cobranded credit cards that provide special interest-free financing deals on car repairs. For example, the Firestone Credit Card offers a six-month deferred interest deal on purchases of $149 or more. The card also comes with a reasonable credit limit. Other large-brand repair shops, such as Midas International and Meineke Car Care Centers, provide a similar type of card.
Store credit cards are closed-loop cards that can only be used at a specific retailer, and they typically require less strict credit score prerequisites than standard cards. These cards are ideal for making infrequent small charges that you can pay off quickly to build your credit scores.
Secured cards, which are secured by an upfront refundable deposit, are even easier to get. But they come with high APRs and low credit limits that may not be adequate for covering expensive repair costs. It’s best to avoid these types of cards, except when you are able to make payments in full each month. If you have bad credit, it’s usually better to apply for an open-loop credit card that can be used everywhere.
Title Loans
Often called “auto equity loans,” title loan lenders base the amount of money they offer on a borrower’s car value. In order to get a title loan, borrowers need a clear car title, a government-issued ID and proof of income. Typically, they will fill out the application at a lender storefront location while the loan officer appraises the vehicle.
Because of the ease of approval, many people with bad credit turn to title loans to meet their short-term cash needs. However, if not paid back on time, a title loan can end up costing borrowers a lot of money in interest and fees. And in some cases, borrowers may even risk having their vehicles repossessed.
In the short term, a title loan can improve a borrower’s credit score if they make on-time payments. But, as mentioned above, there are other options that can provide quick cash and come with less costly terms.
It is best to seek out these other options before resorting to a title loan, which can cause more long-term damage than good. Instead, work on resolving the root of the problem by revising your budget and working with a credit counselor. For more news about credit cards, banking and money, follow us on TikTok, Facebook, Instagram and Twitter. And for more in-depth coverage, subscribe to CNBC Select.
Payday Loans
If you have bad credit and your vehicle is in need of urgent repairs, you may be tempted to take out a payday loan. But before you do, consider your options carefully. Taking on new debt is always risky, especially in emergency situations. And it is important to remember that how you manage this loan will largely impact your credit rating and report going forward.
While you may think that payday loans are the only option, you could also try personal loans for bad credit. Some online lenders work with people in your situation and have programs that allow you to prequalify for a personal loan with a short term, a low rate, and no fees. But keep in mind that the lender will perform a credit check and you must have a verifiable income to qualify.
Another possibility is to ask friends or family if they can help you cover your car repair costs. This is a great alternative to taking out a loan or credit card because you don’t have to pay interest on the money you borrow from someone close to you. Just make sure that you put the terms of your agreement in writing to avoid conflicts or damage to your relationship. In addition, you can check with local mechanics and auto repair shops to see if they offer payment plans.
