Loans for Car Repairs
Most cars have over 30,000 parts and components – it’s a wonder they don’t break down more often. But when they do, it can be expensive. Here’s some information about loans for car repairs.
What are loans for car repairs?
It means taking out a personal loan to cover the cost of repairs. Depending on the vehicle and the damage needing repairs, this can range from several hundred dollars to several thousand dollars.
Often, people need money for car repairs urgently and very quickly.
Payday loans for car repairs
A payday loan is a fast cash loan typically of $2,000 or less. A personal loan, for comparison, is usually over $2,000.
These fast cash loans often have extremely high interest rates – over 40% in most cases. Adding on the fees, it’s not uncommon to pay back over $3,000 on a $2,000 loan.
Furthermore, lenders often look at payday loans unfavourably. If you apply for a car loan, personal loan, home loan or similar whilst repaying payday loans, approval can be difficult.
This is where it can get tricky. You might need a loan for car repairs to get to work to pay back the loan – among other bills.
A personal loan for car repairs
This may be an option for some motorists. If the repairs needed on a car are over $2,000, a personal loan might be a good option. These loans have much lower interest rates compared to payday loans.
It’s not uncommon to find a personal loan with a rate of less than 12% – far lower than a payday loan’s 40% and more.
Depending on the lender and circumstances, the funds will likely be transferred directly from the lender to the qualified mechanic. Lending institutions usually need a written quote on the repairs too.
Why does the money go from the lender to the mechanic?
Again, depending on the lender, they’ll want to see the funds used for exactly what they’re intended for – getting the borrower back on the road.
A car loan
This may suit borrowers who have decided a loan for car repairs isn’t worth it. For example, paying to fix an older vehicle which will likely break down again in the future.
Trading in or selling a vehicle in need of repairs is difficult but can offer a substantial deposit for a car loan. Secured car loans offer lower interest rates than personal loans and far lower rates than payday loans.
The end result could be a newer, more reliable and safer vehicle.
A car loan and a loan for car repairs
This idea is popular for some borrowers. It means taking out a car loan and buying a new car in addition to a personal loan for the car repairs. Once the original car is repaired, a borrower will sell it and use these funds to reduce the car loan and/or personal loan.
It’s much easier to sell vehicles in good, working condition. Although this strategy can take a bit of time to repair a car and buy a new one, the result can be a new car with a reduced loan amount.
But I need to get to work, I can’t wait for a car loan to get approved and go buy a new one.
Today, car loans can be approved very quickly. In fact, sometimes, within only a day or two. With a car needing repairs off the road anyway, it might be a good opportunity to check out cars for sale.
If your car is nearing possible repairs, it might be better to bite the bullet and getting a new car. This will help avoid going without a vehicle and having to pay for costly repairs.
Secure car loans offer more than just competitive interest rates. These loans require vehicles to be comprehensively insured meaning that future car repairs could be covered by the policy. Of course, this depends on the repairs and insurance policy.
Caring for your car
One of the simplest ways to avoid loans for car repairs is by avoiding having to repair your car. Make sure to get it serviced as per the logbook. Using the correct engine oil and knowing what the check engine light means is a good start.
Loans for car repairs summary
Often, it’s worth asking yourself, ‘how much are my time and energy worth?’. Avoiding servicing may save money in the short term, but is it worth the cost of repairs and having your car off the road?
If your car is starting to become more hassle than it’s worth or you’re just in need of an upgrade, a car loan is often a good option.
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