As the name suggests, a car repair loan is designed to help with expensive repairs.
The more advanced a car gets, the more expensive it is to repair. The more exotic materials it contains, even a simple scratch or fender bender can have expensive consequences. Insurance will cover accidents but anything else is up to you.
If you’re facing vehicle repair bills and have no savings, a car repair loan may be the answer.
What Type of Car Repair Loans are There?
There are two main types of car repair loans, the auto title loan and the auto equity loan. Which is best depends on your situation.
Auto title loan: This is useful for those who have paid off their car. If you have no outstanding finance on it, you could use an auto title loan to help pay for repairs.
The amount of loan depends on the value of the car. The higher the value, the more you can borrow and/or the easier you’ll find it to access this type of loan.
The downsides are that the lender owns the car until you pay off the loan and interest rates can be higher than personal loans.
Auto equity loan: An auto equity loan is useful for those with outstanding finance on their car or who have bad credit. This loan uses the equity on the car, the amount left over after the main finance is settled.
The amount of loan depends on how much equity you have on the car. While your credit score counts, as the loan is tied to the car, it’s a viable option for those with bad credit.
The downsides are that these loans can come with fees and higher interest rates. You also have more debt tied to your car and two lenders with a claim on it should you default.
Are Car Repair Loans a Good Idea?
Car repair loans can be useful if you have no other source of funds. If you don’t have credit cards or have maxed them out, don’t have access to a personal loan, family loan, savings or anything else, they can get you back on the road.
They do come with fees and interest though and shouldn’t be taken on lightly. As long as you know what you’re getting into and know you can successfully pay it off, they may be the short term solution you need to get your car repaired.
For those of you who know that you have a challenging credit situation, please visit Dixie Auto Loans where we have a team of credit specialists ready to help you get approved for a car loan today!