Car Repair Financing

How Does an Auto Repair Loan Work?

Due to the changing weather and road conditions in Canada throughout the year, maintaining your car in optimal condition can be challenging. Car ownership can become quite costly, particularly when unexpected maintenance issues pop up at the most inconvenient times. If you're facing such a situation, don’t panic—there are solutions available. While you can rely on cash, credit cards, and other forms of credit for many car-related expenses, more expensive repairs are often better financed through an auto repair loan.

You An auto repair loan allows you to finance your car repairs, eliminating the need to pay your mechanic a large lump sum upfront. This is especially helpful for those who may not have enough cash on hand for expensive repairs. With an auto repair loan, you can enjoy a lower interest rate compared to credit cards and a manageable payment plan that’s easy to follow.

After receiving approval for financing, your repair shop will be paid in full, and you’ll make convenient monthly payments until the cost of the repairs is fully paid off.

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Personal (Installment) Car Repair Loans
When you apply for a personal car repair loan, you’ll typically be offered two types of financing options: “secured” and “unsecured” loans. Each option has its own set of advantages and disadvantages, so it's important to weigh them carefully before making a decision.

Secured Personal Loans for Car Repair
A secured loan involves offering a valuable asset, such as your home or another vehicle, as collateral to secure the loan.

Pros

• Increased Approval Chances – Offering collateral can improve your chances of loan approval.

• Lower Interest Rate – Securing the loan with an asset can increase your chances of obtaining a lower interest rate.

• Bad Credit May Be Accepted – Collateral adds credibility to your loan application, which can be especially beneficial if you have poor credit or limited financial strength, as it makes you appear less risky to lenders.

Cons

• Risk of Losing Your Asset – The major drawback of secured loans is the risk of losing your asset if you miss payments or default on the loan. When you provide collateral, the lender temporarily holds the title to it and has the right to sell it if they consider the debt uncollectible. Be sure to consider this risk before applying for a secured car repair loan.

Unsecured Personal Loans for Car Repair

Unsecured car repair loans are available without requiring collateral, making them a less risky option for the borrower.

Pros

• Safer Option – Unsecured loans are safer since your assets aren’t at risk. If you default, you may face penalties or legal consequences, but your property won’t be seized.

Cons

• Harder to Qualify – If you have poor credit and don’t offer collateral, it can be more difficult to qualify for the loan amount you need.

• Higher Interest Rates – Without collateral, lenders may charge higher interest rates, which can negatively affect your finances if not properly budgeted.

Car Repair Payday Loans
If you have trouble qualifying for a personal loan, a payday loan may be an option. These are short-term loans with extremely high interest rates, often ranging from 300% to 600%. Loan amounts typically range from $1,000 to $1,500, depending on the lender. Like personal loans, payday loans also have their pros and cons.

Pros

• Quick Funding – Payday lenders often approve and fund loans within a few hours to a couple of days.

• No Credit Check – Many payday lenders don’t require a credit check, which can be beneficial for those with poor credit.

Cons

• Payday Loan Cycle – One significant drawback is the potential to fall into the payday loan cycle, where borrowers struggle to repay the loan and take out additional loans to cover the previous debt.

• High Cost – Payday loans come with a high borrowing cost due to their short terms, steep interest rates, and additional fees.

Ways to Finance Car Repairs
There are several options available for financing your car repairs, each with its own set of advantages and disadvantages. The choice of financing method will depend on the type of loan you select and your individual financial situation.

What Does a Car Repair Loan Cover?
A car repair loan is an installment loan specifically designed to help you manage the cost of expensive car repairs. However, it can cover more than just repairs. In fact, a car repair loan can also be used to finance various vehicle-related expenses, including:

General Maintenance Costs

• Oil, coolant, and other fluid changes

• New batteries

• Inspection fees

• Seasonal tire changes

• Seasonal rustproofing

• Muffler patching and replacement

• Timing belt/chain replacement

• Air conditioning/heating maintenance

Cosmetic Improvements

• New or custom paint jobs

• Tinted windows

• New seats

• Rust, dent, and scratch removal

• Custom additions (spoilers, rims, spokes, etc.)

Overall Safety Improvements

• New tires (all-season, winter, summer, etc.)

• Headlights, taillights, interior light repairs

• Windshield or window replacements

• New brake pads and discs, or other brake-related repairs

• New airbags, seatbelts, and other safety features

• New suspension or transmission

Accident and Damage Repairs

• Cracked/broken windshield or other windows

• Fender and bumper replacements

• Front and side airbag replacements

• General bodywork repairs

Types of Vehicles Covered Under Auto Repair Loans
Auto repair loans aren't just for your primary car. These loans can also be used to finance repairs for a wide range of commercial and recreational vehicles, including:

• Motorhomes, trailers, and recreational vehicles

• Trucks and oversized vans

• Motorcycles, dirt bikes, and other all-terrain vehicles

• Boats and jet skis

• Tractors and other heavy-duty work vehicles

• Skidoos and other winter vehicles

How to Qualify for an Auto Repair Loan
Like any other type of loan, there are certain requirements you must meet to qualify for an auto repair loan. While specific qualifications can vary depending on the lender, you should generally expect to meet the following criteria:

• Credit Score – Lenders may have a minimum credit score requirement. If your credit score is low, you may still qualify for a car repair loan, but you might need to find a lender that accepts borrowers with bad credit.

• Income Level – Lenders will typically ask for proof of income to ensure you can afford to repay the loan.

• Debt Level – Your debt-to-income ratio will be evaluated to determine whether you can manage the loan payments. A lower ratio increases your chances of approval and may help you secure a better interest rate.

• Employment Stability – Lenders often require that you have been employed for at least 3 to 6 months.

• Bank Account – A bank account that has been active for at least 3 months is usually required to facilitate the funding and repayment of your loan.

Things to Consider When Financing Your Car Repairs

Remember, as beneficial as car repair loans can be, they need to be handled responsibly if you want to avoid racking up more debt than you can handle. So, before you apply, it’s important to ask yourself questions like:

• How much is the car itself worth? Should I take it to be evaluated before I apply?

• How old is the car?

• How many kilometres does it have on the odometer?

• What is the total cost of the present repair or maintenance procedure?

• Are these procedures going to be recurring problems?

• Is it more logical or affordable for me to just purchase a new car?

• Will the cost of this repair loan fit into my budget and can my income support it?

Auto Repair Loan FAQs

Can I Get a Car Repair Loan with Poor Credit?

Having a high credit score is not always a requirement for securing a loan. If your credit is less than stellar, obtaining financing for car repairs is still possible. Many people are surprised to learn that there are multiple options available, even with poor credit. Lenders tend to view your financial history as a whole, meaning they consider various factors beyond just your credit score when making decisions.

Can I Finance My Car Repair?

Yes, there are many lenders in Canada that offer loans specifically to cover the cost of car repairs. A loan can be a good solution if you’re unable to pay for a large repair upfront.

Should I Use a Credit Card for My Car Repair?

While it may be tempting to use your credit card for emergency car repairs, especially if you're in a rush, it may not be the best choice for larger repairs. For smaller repairs under $100, a credit card might be acceptable, but for repairs costing hundreds or thousands, the high-interest rates and short payment cycles could make the repair significantly more expensive in the long run. Instead, obtaining a small loan to cover the cost of the repair is often a more cost-effective and smarter option.

Is It Worth Repairing My Car?

If the repair costs exceed the value of your car, it may not be worth fixing. In such cases, selling the car and purchasing a new one might be a better option.

Can I Finance My Car Repair Through My Auto Repair Shop?

Yes, some auto repair shops offer in-house financing or partner with lenders to provide financing options. If your repair shop doesn’t offer financing, you can explore other external lending options. The choice depends on the repair shop’s offerings and your personal preferences.

We’ll Get You Back Behind the Wheel

We can assist you in working with the garage of your choice to finance your maintenance and repairs and get you back on the road. Visit our auto maintenance loan application page and start the process today!

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