Auto repair loans are small emergency loans available from online lenders ranging from $100 to $1,000. Some lenders might offer more than that depending on multiple factors, such as your relationship with them and credibility. When small emergency loans are utilized to meet the repair cost of your car, they are called auto repair loans. As these loans carry a small amount of money, the decision is made instantly.
Qualifying for an auto repair loan for bad credit on instant approval is not a cinch, but financial experts suggest that you borrow money with utmost caution. As these loans carry high interest rates, you will most likely fall into an abyss of debt.
How do auto repair loans work?
They are called auto repair loans only because they are aimed at meeting car repair expenses, but they work the same way as any other small emergency loans do. When your car starts acting up, or you need money to have it repaired, you can contact any lender to borrow money. Banks will not address your concern because they are not known for providing small loans to help tide you over when savings fall short.
You are required to submit a loan application form online once you have picked a lender. After submitting your application, your lender will review it. Lenders use algorithms to evaluate your credibility rather than manual checking, and therefore, it takes only a couple of minutes to shortlist your application. It depends on whether a lender will run hard credit checks or soft credit checks. Hard checks leave search footprints, and as a result, your credit points will plummet. However, that impact is temporary. Your credit score will improve as soon as you discharge the debt.
Soft inquiries are not recorded on your credit file, and therefore, you do not lose your credit points. Once the application is approved, you will receive money in your account. Note that you will have to provide your income details because it helps a lender decide whether you can discharge the debt on time. In addition, you could be asked to provide additional details, such as the number of dependent family members.
A responsible lender would always carefully examine your repaying capacity to ensure that you do not fall behind on payments.
What things do you need to keep in mind?
Auto repair loans could be expensive. Not only do they carry high interest rates, but they are also discharged in fell one swoop.
- Borrow from a responsible and registered lender
There are various direct lenders who provide these loans, so it is important that you do proper research. Not all lenders are registered. If you borrow from an unregistered lender, you will end up with very high interest rates. You will most likely fall into an abyss of debt.
Borrowing from a registered lender will prevent you from bearing too much interest payments. Responsible lenders carefully assess your repaying capacity so you do not end up borrowing more than your affordability. However, despite that, you cannot just rely on their judgement.
A golden rule of thumb says that you should analyse your repaying capacity on your own. Borrowing more than your affordability will force you to roll it over. Rolling over the loan will simply increase the total cost of the debt.
It is hard to determine the exact cost of the debt beforehand, but you can use online calculators to know the estimated cost. This will help you know whether your budget has wiggle room for it.
- Keep your credit rating decent
While you can easily qualify for auto repair loans despite a bad credit rating, it is still recommended that you maintain a good credit rating. A good credit score will help you borrow money at lower interest rates. While a bad credit rating is not a snag, on no account can the importance of a good credit rating be ignored.
Before you apply for a lender, make sure that you know which credit rating the lender accepts so you are not repudiated on the grounds of your credit rating.
Alternatives to auto repair loans
Here are the alternatives to auto repair loans:
- Personal loans
Auto repair loans are normally small loans. Most of the time, lenders will not borrow a large amount of money. However, there is a chance that you will need large funds to cover the cost of your car repair. Here, personal loans come in handy.
Personal loans are available for subprime borrowers. They could carry high interest rates, but they are paid down in fixed instalments.
- Bad credit loans
If you need a small amount of money to have your car repaired, you can use bad credit loans as an alternative to auto repair loans. If your credit score is too bad and you are worried about losing your credit points, you can use loans for bad credit with a no credit check.
Remember that these loans are also expensive because lenders will make a lending decision based on your income source. In order to improve your chances of getting approved, you should have a strong income source. This will likely offset the impact of no credit checks.
- Credit card
If you have a credit card and it has some balance, you should use this. Credit cards are more convenient when you come across some emergency, and your savings fall short of cash. Credit cards are useful for small transactions because the entire debt is paid off in fell one swoop. Make sure that you will discharge your credit card debt within the interest-free period.
To sum up
Auto repair loans are small loans used to meet the repair cost of a car. You can avail yourself of these loans at better interest rates if your credit score is decent. Consider other alternatives as well so you can choose a loan that suits your budget.
It is always recommended that you borrow money from a responsible and registered lender. They adhere to responsible lending practices to ensure that you do not end up borrowing more than your affordability.
For over 5 years, Alex Thomas has been working as a noteworthy content writer at Zeolitefunds. After graduating in Economics, he started working in the finance sector. His interest in loans has encouraged him to explore extensively. His write-ups in the form of blogs and articles have shown his exceptional knowledge. Alex’s work is a product of his hard-core research and writing expertise.