Car repair loans: What you should know
If your car develops major issues or has been smashed in an accident, your repair bills can run into large sums of money. You may need to borrow to meet these expenses. Some lenders offer car repair loans to help you at times like this.
Your car repair financing could be for a smaller amount such as between $2000 and $5000, or for a larger sum. You may be able to choose a loan term as short as a few weeks, or opt to repay the cost of your car repairs over several years. You may also be able to set up your repayment frequency as weekly, monthly or quarterly, and choose between fixed or variable interest rates.
Car repair loan lenders generally promise that your application will be processed quickly. This speed can help you get your car back on the road sooner, which may be necessary for your work, or just for convenience. However, you should consider the total cost of the loan, including all charges and the interest cost, when considering taking out a loan. See whether you can find an alternative financing option before deciding whether a car repair loan is a better choice.
How to choose a good car repair loan
It’s essential to compare the interest rates of car repair financing from different lenders before choosing the loan for you. These may include payday loans and other short-term personal loans, which can be expensive, as well as more traditional personal loans.
When comparing lenders, find out all the additional expenses that may apply, from application costs to ongoing fees and any missed payment fees. While it may be tempting to opt for quick car repair loans, watch out for hidden costs or unreasonable interest rates.
You should also check whether you will be charged fees for repaying the car loan sooner than the agreed loan term. You may want to find a lender who doesn’t charge this, so if you happen to have the funds to pay off extra, you can get closer to repaying the loan in full without incurring other costs.
Car repair loans and bad credit
Some lenders who offer car repair financing are open to offering loans to borrowers with low credit scores. If you’re concerned about bad credit affecting your car repair loan, you may want to take the time and effort to compare different lenders. If you’re approved, repaying the loan on time may even help to improve your credit score.
Secured and unsecured car repair loans
Secured car repair loans
With a secured car repair loan, the lender may need security to offer you the loan. You may be able to use your vehicle as collateral with a secured loan, which could help you get better interest rates and faster approval. However, there is then a risk that the lender could repossess your car if you cannot repay the loan.
Unsecured car repair loans
If you can get car repair financing without offering any security, this is considered an unsecured loan. The interest rate will typically be higher, but you can compare different lenders to find the most appropriate one for you. Think about the options carefully and select the loan type based on your financial situation.
If you’re receiving Centrelink payments and plan to repay the car repair loan using this income, you may have to shop around a bit more. Some lenders will not offer you a car repair loan if Centrelink is your primary source of income. Depending on your situation, you could also consider requesting a Centrelink advance payment to help you cover the cost of car repairs.
You could contact a personal loan broker or car loan broker who works with a diverse panel of lenders which might boost your chances of getting approved.
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Product database updated 04 May, 2024
