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Having a vehicle in need of repair after an accident or break down can happen to the best of us. But no one plans for their car to need urgent repairs, and, depending on the type of repairs, costs can climb from hundreds to thousands of dollars. 

So, what are your options when you need car repairs but cannot afford them upfront? This is where a car repair loan may come in handy. With a range of competitive options from Australian personal loan lenders for a multitude of financial situations, you may be able to cruise the open road sooner than expected.

What are personal loans for car repair?

It's no secret that car repairs can be expensive, and no one wants to cut corners when it comes to the reliability of their vehicle. Personal loans for car repair, also known as auto repair loans, may be able to help cover these repair costs.

This type of personal loan is designed to help Aussie drivers get back on the road by providing the borrower with a loan sum that they can then pay the mechanic and/or auto body shop. The personal loan is then to be repaid over a set loan term at a chosen interest rate, generally fixed or variable.  

The loan amount you require will depend on the type and severity of replacements and repairs your vehicle needs. This means that an emergency car repair loan may start from anywhere from a few hundred dollars for a small loan, to thousands of dollars for a medium loan, to tens of thousands of dollars for a large loan.

Much like any other type of personal loan, the borrower will need to meet certain eligibility criteria to receive loan approval. This may include meeting income minimums or having a very good to excellent credit score.  

There are a range of Australian lenders who offer personal loan deals for car repair, so it’s best to perform a personal loan comparison and compare loan options for your financial situation.

What repairs might a car repair loan cover?

A car repair loan may be able to assist the borrower in paying for any of the following common vehicle costs, and much more:

  • Engine repairs
  • Body repairs
  • Gearbox or transmission repairs
  • Electrical repairs
  • Suspension
  • Radiator
  • New tyres
  • Fuel system
  • Breaks
  • Car registration

What are the main features of a personal loan for car repair?

Much like a standard personal loan, a car repair loan offers standard features, including: 

  • Interest rate – Arguably one of the biggest costs of a personal loan, an interest rate is the rate of interest the lender charges on top of your loan amount. If you’re hoping to find a cheap car repair loan, keeping interest rates low may be able to help.
  • Repayment type – Choose between a fixed interest rate, in which the rate will not change for the duration of the loan, or a variable interest rate which is subject to market fluctuation – both good and bad.
  • Repayment frequency - Choose your payment plan options and pay weekly, fortnightly or monthly.
  • Fees – There are a range of fees a personal loan lender may charge, including establishment fees, monthly fees, and annual fees.
  • Loan term – The set period you agree to repay a personal loan.  A short-term loan may be 1-3 years, and a long-term loan may be 4-5 years.
  • Secured or unsecured – Borrowers may choose to secure the loan against an asset, such as the vehicle, to increase your likelihood of loan approval or being offered a lower interest rate. If you were to default on the loan the asset would be seized. Comparatively, unsecured loans do not require the borrower to offer up an asset as security, but due to the greater risk posed to the lender, they generally may come with higher rates and fees.

What are the pros and cons of personal loans for car repair?

It’s worth weighing up the benefits and disadvantages of a car repair loan before you consider applying.

One of the main benefits of a car repair personal loan is that it may be a handy way to pay for your vehicle repair service and get back on the road quickly. This can be particularly useful for those who use their vehicle for business purposes or drive long commutes every day and cannot afford to be off the road.

Personal loans also tend to have lower interest rates than credit cards on average, so the cost may be lower than trying to pay for repair services on your card. However, if you’re the type of cardholder who always pays their balance in full each statement period, this may not be applicable.

On the other hand, you will still need to apply and be approved for the personal loan before you can use these funds on car repairs. The loan application process can take a bit of time and organising, including providing the lender with personal identification, bank statements and waiting for a credit check. With online applications offered by most lenders, this process may only take 15 minutes. But it may still take several business days from indication of need of repairs to getting the funds in your bank account.

You will need to meet the eligibility criteria of the lender to be approved for the loan, and if you struggle with bad credit this may unfortunately hurt your chances. If you struggle with a poor credit history, it may be worth boosting your credit score before you apply.

Frequently asked questions

Is a personal loan a variable or fixed-rate loan?

Depending on the personal loan lender, you may be able to choose between a fixed and a variable interest rate. But, there are a few distinct differences between the two, so it’s important to weigh up the pros and cons before deciding on what’s right for you.

A fixed interest rate loan gets you the convenience of knowing exactly how much you need to repay each fortnight or month. On the other hand, you generally won’t be able to make lump sum or advanced payments to close your personal loan early - or at least not without a penalty.

With a variable interest rate personal loan, you may be able to get a longer loan repayment term, with the option of paying off the loan early. You typically won’t need to pay any additional charges for an early full repayment either. The potential disadvantage with an interest rate that can change is that your repayment is not entirely predictable, as it can fluctuate with the market. However, you’ll likely have more options as more lenders offer a variable interest rate personal loan.

What is a personal loan?

A personal loan sits somewhere between a home loan and a credit card loan. Unlike with a credit card, you need to sign a formal contract to access a personal loan. However, the process is easier and faster than taking out a mortgage.

Loan sizes typically range from several hundred dollars to tens of thousands of dollars, while loan terms usually run from one to five years. Personal loans are generally used to consolidate debts, pay emergency bills or fund one-off expenses like holidays.

Can you refinance a $5000 personal loan?

Much like home loans, many personal loans can be refinanced. This is where you replace your current personal loan with another personal loan, often from another lender and at a lower interest rate. Switching personal loans may let you enjoy more affordable repayments, or useful features and benefits.

If you have a $5000 personal loan as well as other debts, you may be able to use a debt consolidations personal loan to combine these debts into one, potentially saving you money and simplifying your repayments.

What is a bad credit personal loan?

A bad credit personal loan is a personal loan designed for somebody with a bad credit history. This type of personal loan has higher interest rates than regular personal loans as well as higher fees.

Should I get a fixed or variable personal loan?

Fixed personal loans keep your interest rate the same for the full loan term, while interest rates on variable personal loans may be raised or lowered during your loan term.

A fixed rate personal loan keeps your repayments consistent, which can help keep your budgeting consistent. You won't have to worry about higher repayments if your rates were to rise. However, on a fixed loan you’ll also potentially miss out on more affordable repayments if variable rates were to fall.

What is the average interest rate on personal loans for single parents?

Like other types of personal loans, the average interest rate for personal loans for single parents changes regularly, as lenders add, remove, and vary their loan offers. The interest rate you’ll receive may depend on a range of different factors, including your loan amount, loan term, security, income, and credit score.

Can I merge my personal loan with my home loan?

Yes, you can refinance your home loan and, in the process, merge or consolidate your personal loan and home loan. By doing so, you can lower the number of debts you have, and you may also reduce the total interest you have to pay.

However, you should consult a financial advisor or a mortgage broker to confirm that you are decreasing your total outstanding debt, including interest payments. The repayment term for a home loan can be much longer than that for a personal loan, and by merging the two, you could be repaying a higher amount over the full term.

Does refinancing a personal loan hurt your credit score?

Personal loan refinancing means taking out a new loan with more desirable terms in order to access a more competitive interest rate, longer loan term, better features, or even to consolidate debts.

In some situations, refinancing a personal loan can improve your credit score, while in others, it may have a negative impact. If you refinance multiple loans by consolidating these into one loan, it could improve your credit score as you’ll have only one outstanding debt liability. Your credit may also improve if you consistently pay the instalments on time.

However, applying to refinance with multiple lenders could negatively affect your credit if your applications are rejected. Also, if you delay or default the repayment, your credit score reduces.

How long does it take to get a student personal loan?

Completing an online personal loan application can often take anywhere from 10 minutes to 1 hour. Depending on your lender, processing your personal loan application may take anywhere between 1 and 24 hours. If your personal loan application is approved, you may receive the money in your bank account the following business day, or, in some cases, the same day.

What causes bad credit ratings/scores?

Failing to repay loans and bills will damage your credit score. So will falling behind on your repayments. Your credit score will also suffer if you apply for credit too often or have credit applications rejected.

How long does it take to get a bad credit personal loan?

In the best-case scenario, an application for a bad credit personal loan can be made within minutes and then be approved within 24 hours. However, if a lender needs more information or needs more time to verify the provided documents, the application process may take longer.

Where can I get a personal loan?

The Australian personal loans market contains dozens of lenders offering several hundred different products. Personal loans are available through a range of institutions, including:

There are three main ways to access personal loans. You can go through a comparison website, such as RateCity. You can use a finance broker. Or you can directly contact the lender.

What is comprehensive credit reporting?

Comprehensive credit reporting is a system which includes both positive and negative information on a person’s credit file. Before comprehensive credit reporting was introduced, only negative information was included.

What is a credit rating/score?

Your credit rating or credit score is a number that summarises how credit-worthy you are based on your credit history.

The lower your score, the more likely you are to be denied a loan or forced to pay a higher interest rate.

What causes bad credit history?

Bad credit history is caused by filing for bankruptcy, defaulting on your debts, falling behind on your repayments and having loan applications rejected. Lenders are wary of borrowers who demonstrate this sort of behaviour because it suggests they might struggle to repay future loans.

Borrowers with bad credit may find it more difficult to be approved for a loan, or they may get higher interest rates when they do get approved.

How much can I borrow with a personal loan?

It’s unusual for a lender to provide a personal loan of above $100,000, although there is no formal limit. As with all lending products, each lender sets its own policies, while each borrower is assessed on a case-by-case basis.

How much can you borrow with a bad credit personal loan?

Borrowers who take out bad credit personal loans don’t just pay higher interest rates than on regular personal loans, they also get loaned less money. Each lender has its own policies and loan limits, but you’ll find it hard to get approved for a bad credit personal loan above $50,000.

What are the pros and cons of debt consolidation?

In some instances, debt consolidation can help borrowers reduce their repayments or simplify them. For example, someone might take out a $7,000 personal loan at an interest rate of 8 per cent so they can repay an existing $4,000 personal loan at 10 per cent and a $3,000 credit card loan at 20 per cent.

However, debt consolidation can backfire if the borrower spends the extra money instead of using it to repay the new loan.

How can I improve my credit rating/score?

Your credit score will improve if you demonstrate that you’ve become more credit-worthy. You can do that by minimising loan applications, clearing up defaults and paying bills on time.

Another tip is to get the one free credit report you’re entitled to each year – that way, you’ll be able to identify and fix any errors.

If you want to fix an error, the first thing you should do is speak with the credit reporting body, which may take care of the problem or contact credit providers on your behalf.

The next step would be to contact your credit provider. If that doesn’t work, you can refer the matter to the credit provider’s independent dispute resolution scheme, which would be the Australian Financial Complaints Authority (AFCA).

AFCA provides consumers and small businesses with fair, free and independent dispute resolution for financial complaints.

If that doesn’t work, your final options are to contact the Privacy Commissioner and then the Office of the Information Commissioner.

Do student personal loans require security?

While some personal loans can be secured by the value of an asset, such as a car or equity in a property, student personal loans are often unsecured, which typically have higher interest rates.

Some lenders also offer guarantor personal loans to students. These loans have lower interest rates, as a guarantor (usually a relative of the borrower with good credit) will fully or partially guarantee the loan, taking on the financial responsibility if the borrower defaults.