If you're facing an expensive car repair, an auto repair loan could help you cover it—and you could get the money you need as soon as the same day you apply.
An auto repair loan is typically a personal loan that you use to fix your car. You'll generally need at least fair credit and verifiable income to qualify, though some lenders offer loans to bad-credit borrowers as well.
14 personal loans for auto repair
Personal loans can be used for almost anything, including auto repairs. Here are Credible's partner lenders that offer auto repair loans:
All APRs reflect autopay and loyalty discounts where available | LightStream disclosure | SoFi Disclosures | Read more about Rates and Terms
What is an auto repair loan?
An auto repair loan is typically any loan that can be used to cover car repairs. They include personal loans, short-term loans, such as cash advance app loans and small bank loans, payday alternative loans, and more. Most auto repair loans are relatively quick and easy to get and generally don't require collateral. They typically have the following characteristics:
- No collateral required: For example, most personal loans are unsecured, which means you won't have to worry about losing your assets (like your car or home) if you can't make payments.
- Funds come in a lump sum: If approved, you'll receive the funds as a lump sum that you can use for your auto repairs.
- Typically fast funding: Funding could be instantaneous, take a few hours, or take one to two days, depending on the type of auto repair loan.
Types of auto repair loans
There is not a single type of auto repair loan but many. Some are safe and offer several advantages, while others are predatory and should be avoided. Here are a handful of loan types to consider.
Personal loans
For funding auto repairs, personal loans are often the best choice for borrowers who qualify because they tend to have:
- Fixed APRs that max out at 36%
- High lending maximums,
- Quick, sometimes same-day, funding
- Repayment terms of one to seven years
However, they aren't the only option for borrowing money to fix your car.
Small bank loans
Some banks offer short-term, small-dollar installment loans to qualifying customers.
These loans go by different names, but they generally have low borrowing limits of $1,000 or less and may be repaid in three monthly payments, with fixed fees instead of interest. You might qualify with poor or limited credit. Bank of America's Balance Assist and U.S. Bank's Simple Loan are two popular examples.
Small Dollar Loan Program
You may also qualify for a small loan made possible by government funding. The Small Dollar Loan Program (SDL Program) issues grants that allow qualifying institutions to offer small loans to unbanked and underbanked borrowers, meaning individuals with less access to financial services and credit.
Through this program, Community Development Financial Institutions (CDFIs) receive funding awards that they can use to provide eligible loans to qualifying consumers. CDFIs are mission-driven institutions, certified by the U.S. Department of the Treasury, that promote economic opportunity for low-income individuals and communities.
For loans to be funded with grants under this program, they must be $2,500 or less and repaid in installments, and lenders can't charge prepayment penalties and must report activity to the credit bureaus. Consumers can't get loans directly through the SDL Program. But if you think you might qualify for a CDFI loan, use the CDFI database to find an institution near you.
Cash advance apps
Cash advance apps provide quick funds with no credit check. These loans have low maximums that generally cap out at $1,000 but often start lower the first time you borrow. Often, you borrow against your paycheck and are expected to repay your balance the next time you get paid.
Fees vary, but service, late, and subscription fees may apply. You can consider this option if you have poor credit or don't need to borrow much money, but avoid paying extra fees to expedite your payment.
Payday alternative loans (PALs)
Payday alternative loans are small loans offered by many federal credit unions that provide a safe alternative to payday loans for borrowers with bad credit or fair credit.
These loans are available for amounts up to $2,000 with repayment terms of one to 12 months. Unlike payday loans, these are installment loans you make regular payments toward, and their interest rates are capped at 28%. PALs can't charge you more than $20 in fees.
Compare: Payday Loans vs. Cash Advance
Loans to avoid
Steer clear of the following auto repair loan types:
- Payday loans: Payday loans are a type of short-term loan with high fees and low borrowing limits. These are risky because they typically have to be repaid in as little as two weeks, which can lead to rolling over your loan or reborrowing to cover your debt. While payday loans don't charge interest, they generally charge sky-high fees per $100 borrowed that can equate to exorbitant rates. For example, $15 charged on a $100 two-week loan is equal to a 391% APR.
- Title loans: Title loans or car title loans are short-term, high-interest-rate loans you open using your car title as collateral. These loans provide immediate funding but have very short repayment term lengths, usually one month or less, and exceptionally high monthly finance fees that come out to 300% APR or higher, plus a number of possible service fees. You also risk losing your car if you can't repay your debt.
- Pawn shop loans: Like title loans, pawn shop loans require collateral and carry high interest rates and monthly fees that may come out to 20% to 25% a month. You can use nearly any valuable item as collateral, such as a piece of jewelry or collectible, but you agree to hand over that item permanently if you can't pay. These loans are opened with pawn shops and are easy to get, but they can be dangerous and costly for borrowers.
Though not loans, credit cards offer another way to borrow money for auto repairs. Credit cards generally have higher APRs than personal loans, so we don't recommend them for long-term borrowing.
But if you know you'll have the cash to repay your balance in full before the grace period expires, a credit card might be the way to go. Otherwise, personal loans are likely the safest choice.
Tip
Credit cards typically have a grace period during which no interest is charged. It often lasts from the end of the billing cycle until the date your payment is due.
How to compare auto repair loans
If you decide to take out a personal loan for auto repairs, consider multiple lenders to find the best personal loan for you. Here's how:
- Check your credit: Check your FICO score to get a sense of the personal loan rates you might qualify for, or whether you'll qualify at all. If your FICO score is considered good, above 670, you're more likely to be approved for a loan at a reasonable rate.
- Know how much you need to borrow: Review the work estimate you got from the mechanic. Do you need to borrow the entire amount, or do you plan to cover some on your own? You may want to consider borrowing more than the estimated amount, since that figure could change. If you do borrow more, be sure to repay what you don't use as soon as the car is fixed - just make sure your lender doesn't charge a prepayment penalty (none of these personal loan lenders do).
- Understand your budget: How much of a monthly payment can you afford? Once you know this, you can use a personal loan calculator to estimate payments over different repayment periods, or you can start prequalifying with lenders to get a customized estimate of your terms.
- Prequalify with multiple lenders: Prequalification doesn't hurt your credit, and allows you to see the APRs (annual percentage rates), monthly payments, loan amounts, and terms you might qualify for with different lenders. Prequalification is not an offer of credit, and your credit score may drop temporarily by a few points once you apply for the loan.
- Compare APRs and loan terms: The APR accounts for the interest rate and upfront fees associated with the loan, which makes it a better measure of cost than interest rate alone. In addition, look for a lender that offers the repayment term you need, that funds within the time frame you need, and, ideally, doesn't charge an origination fee. An origination fee is often deducted from the loan proceeds, which means you could receive less than the amount you applied for.
You should also know how much a loan will cost over time. Before you borrow, estimate how much you'll pay for a loan using a personal loan calculator. Plug in different repayment terms to see total interest costs. Note that a longer repayment term often translates to a lower payment, but also means more interest charges over time.
Learn More: How To Compare Personal Loans
How to apply for an auto repair loan
If you're ready to apply for an auto repair loan, follow these steps:
- Choose the loan option you like best: Once you've compared lender terms, fees, funding times, and APRs, pick the loan option that works best for you.
- Fill out the application: You'll need to complete a full application and submit any required documentation, such as tax returns and pay stubs. Be sure to provide accurate information and get any paperwork back to your lender quickly to streamline the process.
- Review the loan agreement: If you're approved, you'll need to read through the loan agreement and sign it. Make sure the terms are as expected - in particular, the loan amount, monthly payment, APR, the repayment period, and any fees.
- Await your funds: Once you've signed, the lender will begin the process of remitting your funds. With some lenders, you could see the money in your account as soon as the same business day. But, generally, you should expect a 2-3 day turnaround.
Learn More: How To Get a Personal Loan
FAQ
Where can you get an auto repair loan?
Open
What can an auto repair loan cover?
Open
Is an auto repair loan better than using a credit card?
Open
Can you get an auto repair loan with bad credit?
Open
What are some alternatives to auto repair loans?
Open
Read More:
