Can You Get an Auto Repair Loan?

Misc - Save Up for Car/Loan

Benjamin Franklin once famously wrote,“In this world nothing can be said to be certain, except death and taxes”(1). But if you own a several year old car, you can also add “car repair” to that short list. Sometimes, those necessary repairs can be quite costly and buying a new car isn’t always the best or cheapest option. So how do you pay to have your car repaired if you don’t have the cash on hand to do it? Getting an auto repair loan is one option that not a lot of people think about – but it can be a money saving idea, in the long run, especially if not having transportation could cause you to lose your job.

Different Types of Auto Repair Loans You Can Take Out

There are two main types of loans that you may want to consider: secured loans and unsecured loans. A secured loan will require some kind of collateral that the bank can claim possession of if you aren’t able to make monthly payments and you default. Often, this collateral is a vehicle. The only problem is, if your car isn’t worth the amount of the loan you’re trying to take out, it probably won’t be accepted as collateral and you’ll be back to square one. Enter the unsecured loan. Also known as a signature loan, this kind of loan doesn’t usually require any collateral. When mulling over what kind of loan you want to try to apply for, look at the value of your car and how much you still owe on it. Once you’ve decided on the kind of loan you want to take out, it’s time to gather up all your supporting information to bring to your lender of choice.

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Doing Your Homework

First step, get a repair estimate for your car repair. Actually, get a couple of them and find the auto mechanic that’ll offer you the best price for the work you need to have done. Once you’ve settled on a particular mechanic, do your homework on lenders in your area. Make sure they’re reputable and find out exactly what kinds of loans they specialize in. Some banks and credit unions only focus on home mortgages. Others specialize in personal loans. Figure out which institution has the best interest rate for the type of loan you need, and also ask questions to learn what their requirements are. Most lenders will want to check your credit. Depending on your credit history, the interest rate of your loan will likely be based on that.

Applying for the Loan

Once you’ve decided on what lender you want to go with, make an appointment to talk to a loan officer. Bring along your repair estimate and any additional documentation they’ll require you to bring to consider the loan. Some will ask to see your last few check stubs to ensure you’re in a position to make regular payments on your auto repair loan. Always call ahead to find out what you’ll need to bring, as this could vary from one lender to the next. If all goes well and you’re approved, you should have your money within a few days and you can go about the business of paying a mechanic to fix your car’s wounds.

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