Auto Repair Loans: How to Finance an Expensive Car Repair

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What is an auto repair loan?

Auto repair loans are personal loans that are used to pay costly auto repair bills. Personal loan amounts are typically $1,000 to $50,000, though some lenders offer smaller or larger loans. Annual percentage rates, which represent the full cost of borrowing, are fixed and usually range from 6 to 36%.

Since you can use a personal loan for almost any expense, you can use one to pay an auto repair bill if you don’t have the money on hand. Most personal loans are unsecured, meaning they don’t require collateral, and lenders qualify borrowers based on their credit, income and existing debts. Borrowers with good to excellent credit (a score in the mid-600s or higher) have the best chances of qualifying and getting a low APR.

How long does it take to get an auto repair loan?

You can get a personal loan for an auto repair from a bank, credit union or online lender, but online lenders tend to be the fastest.

Here’s a breakdown of approval and funding time for our top picks for auto repair loans:

To speed up the process, make sure you supply all required documentation in your loan application, including proof of employment and income, like a paystub or tax return.

» MORE: How long does it take to get a personal loan?

How to get an auto repair loan

Follow these steps to get a loan to cover auto repair costs.

1. Determine how much you’ll need to borrow. You’ll need a solid cost estimate to know what size loan to ask for. Get multiple quotes to find the best deal, but keep in mind that some mechanics charge a diagnostic fee to determine the scope of the work. Consider factors like the time it’ll take to complete the repairs, the reputation of the repair shop and the distance if you need to tow the vehicle to a shop.

2. Pre-qualify with multiple lenders. Once you know how much you need to borrow, pre-qualify for a personal loan to preview the rate, monthly payment amount and loan term. It is free and typically involves a soft credit pull, which doesn’t affect your credit score. Pre-qualify with multiple lenders and compare loan offers with other financing options to find the best deal.

3. Complete a formal loan application. Gather documents like your driver’s license, pay stubs and tax returns, because many lenders require proof of identification and income on a loan application. The lender will conduct a hard credit inquiry when you apply for a personal loan, causing a temporary dip in your credit score.

» MORE: How to get a personal loan

If you’re approved for the loan, the lender will likely disburse funds within a few days. Your first loan payment will be due in about 30 days, and the monthly payment amount will be the same for the loan term.

Consider enrolling in automatic payments or setting calendar reminders to ensure you make payments on time. Missed payments can result in late fees, and most lenders report payments that are more than 30 days late to the credit bureaus.

» MORE: What happens if you default on a personal loan?

Alternative financing options

Repair shop financing: The dealership or repair shop may offer in-house financing through a third-party lender. For example, Jiffy Lube and Midas both offer credit cards. These financing options may include a low- or no-interest introductory period, but be sure to check the regular interest rate and terms. If you can’t pay the repair off during the promotional period, you may be charged interest retroactively.

Buy now, pay later: “Buy now, pay later” companies, such as Affirm, Afterpay and Klarna, offer payment plans that can help break up an auto repair or car-related purchase, like new tires. These plans may be available directly at the repair shop or dealer, or you can download a BNPL mobile app and search for the store or repair shop in the app’s directory. The most popular plan is called a pay-in-four, in which payments are spread out across six weeks for no interest.

Zero-interest credit card: Some credit cards have no-interest promotional periods — generally the first 15 or 21 months — for new account holders. Qualifying for a zero-interest credit card usually requires good or excellent credit. These cards generally don’t charge retroactive interest, so if you don’t pay the card off during the promotional period, you’ll begin paying the regular interest rate once it ends.

Family loan: Borrowing money from a loved one helps you avoid a formal application process and may be an interest-free financing option. Sign a loan agreement to keep both parties on the same page about how the family loan will be repaid.

Financial assistance from a local nonprofit: Some local charities and nonprofit organizations help people in need with bills they can’t afford. Assistance may be based on your household income. A good place to start is 211.org.

Avoid predatory car repair loans

Approach payday loans and title loans with caution, because while they provide borrowers with fast, easy money, their high rates and short repayment periods make them difficult to repay.