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Now you can listen to our blog post, “Auto Repair and Maintenance Financing in Canada” while on the go.
Auto repair and maintenance is an expensive task. While this is not a new truth, understanding how people go about fixing and maintaining their vehicles can provide you with insight as to how they handle other financial responsibilities.
If you’re in this kind of scenario right now, don’t worry; you have options. While you may pay for many car-related expenses using cash, credit cards, and other forms of credit, some of the more expensive treatments may be better funded with a car repair loan.
What Is An Auto Repair Loan And How Does It Work?
You won’t have to make a single hefty payment to your mechanic if you take out a loan to finance your automobile repairs; this is a terrific choice for folks who don’t have a lot of liquid cash on hand for repairs that cost thousands of dollars. Your interest rate will be lower than that of a credit card, and you’ll have an easy-to-follow and sensible payment schedule with a car repair loan.
Your repair shop will be paid in full once you’ve been authorized for financing, and you’ll make affordable monthly payments until you’ve paid off the cost of the repairs.
How Can You Pay For A Car Repair?
When it comes to financing your car repair, you have a number of choices to consider. The benefits and downsides of each car repair loan will vary depending on the one you choose.
Car Repair Loans for Individuals (Installment)
When you apply for a personal car repair loan, you’ll likely be presented with two financing options: “secured” and “unsecured” loans. Each option has its own set of advantages and disadvantages, so think about them carefully before making a choice.
1. Car Repair Secured Personal Loans
When you apply for one of these loans (or another type of secured credit), you’re securing your loan by pledging a valued item, such as your home or another vehicle, as collateral.
Increase Your Loan Approval Chances: Having collateral on hand when applying for a loan will help you get approved faster.
Reduces Interest Rates: It also raises the chances of obtaining a reduced interest rate.
Bad Credit May Be Accepted: Adding collateral to a loan boosts your borrower’s trustworthiness. This is especially advantageous if you have weak credit or little financial resources, as lenders will view you as a lower risk.
You Might Lose Your Investment: One disadvantage of securing collateral is that you risk losing your asset if you miss too many loan payments or otherwise default on your loan agreement. In fact, when you offer an item, your lender takes temporary ownership of it, giving them the ability to sell it to recoup their losses if your debt is deemed “uncollectible.” Before you apply for a secured car repair loan, keep this in mind.
2. Car Repair Unsecured Personal Loans
These forms of car repair loans are unsecured because they can be obtained without the need for any type of collateral.
Safer: Unsecured personal loans are a much safer option because your assets are not in danger. If you default, you’ll almost certainly face a penalty charge or perhaps legal action, but your assets will be safe.
Getting Qualified Is More Difficult: If you have bad credit and don’t have any assets to put up as collateral, getting the loan amount you desire can be difficult.
Increased Rates: Furthermore, if you don’t provide the lender with any form of collateral, your interest rate may be slightly higher. If you don’t incorporate that higher rate into your budget, it can be quite damaging to your finances and lead to bad debt.
3. Payday Loans for Car Repair
If you’re having problems getting approved for a personal loan, you might want to consider a payday loan. Payday loans are short-term loans with exorbitant interest rates ranging from 300 percent to 600 percent. You can only borrow up to $1,000 to $1,500, depending on the lender. These loans, like personal loans, have advantages and disadvantages.
Fast Funding: Many payday lenders can accept and fund customers in as little as a few hours or as little as a few days.
No Credit Check: Many payday lenders do not conduct credit checks, making them an excellent option for people with bad credit.
Payday Loan Cycle: The payday loan cycle is one of the most serious risks associated with payday loans. Those who are unable to repay their loans may become locked in a payday loan loop.
High Cost: Payday loans have a high cost of borrowing because of their short periods, hefty interest rates, and fees.
How Do You Get Approved For An Auto Repair Loan?
To be qualified for a vehicle repair loan, you must meet a few requirements, just like any other sort of loan. There may be some differences in the requirements depending on the lender you work with, but you should be prepared to meet the following:
- Credit Score: Depending on the lender, you may be required to have a certain credit score. If you have a terrible credit score, you may still be able to get a car repair loan, but you’ll need to find a lender who works with people with bad credit.
- Income Level: To determine if you can afford to repay the loan, lenders will ask for proof of income.
- Debt Level: Your debt-to-income ratio is another consideration in determining whether or not you can afford the loan. The smaller your ratio, the more likely you are to qualify for a cheaper rate.
- Employment Stability: Most lenders require that you have been employed for at least three to six months.
- Bank Account: Lenders typically want you to have a bank account that has been open for at least three months. This is essential for your loan to be funded and repaid.
What to Think About When Financing Car Repairs
Remember that, as advantageous as auto repair loans might be, you must use them carefully if you don’t want to get into more debt than you can handle. So, before you apply, ask yourself the following questions:
- What is the car’s actual value? Is it necessary for me to have it examined before I apply?
- What is the car’s age?
- What is the mileage on the car’s odometer?
- How much does the current repair or maintenance process cost in total?
- Will these operations cause issues in the future?
- Is it more rational or cost-effective for me to simply buy a new car?
- Will the cost of this repair loan be within my budget, and will my income be sufficient to cover it?
The Bottom Line
Do you need auto repair financing to cover the cost of your car repairs or maintenance? Call us today at (613) 567-2125 to learn about our auto loan financing or Fill Out the Form Below. We’ll help you find fast, affordable financing for all types of vehicles including cars, trucks, boats, RVs and classic cars.
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