How to finance the expensive repair of your car A car repair often comes at the worst time and usually costs a stick of money – money that in many cases is currently not available. But there is no way around the repair if the mobile pedestal is urgently needed. A car repair loan can help out of a tight spot. Who actually writes and advises here?
Expensive car repair – what now?
Those who have to drive to the workshop in their car are often a few hundred dollars poorer. In the case of major damage, repairs are even in the thousands. Not everyone has a car insurance with comprehensive coverage, with some repair needs it does not work anyway. Then the repair must be paid for out of pocket. If there are no financial reserves for such purposes, all that remains is financing through a loan. The following overview shows which options are available and what you should consider.
What does a car repair loan look like?
In contrast to a car loan for the purchase of a car, there are no special loan products on the market for financing repairs. Anyone who needs a loan for their car repair must therefore access the general loan offers that are aimed at private consumers. There are a lot of them. Workshops do not offer financing themselves. In most cases, the way to a car repair loan is through a bank or a credit broker.
Such loans can now be applied for easily and conveniently online. If there is sufficient credit, access to credit is not a problem either. It becomes more difficult with creditworthiness deficiencies.
What types of credit are there?
1. Normal installment loan
The installment loan is the usual instrument to finance larger purchases or wishes. Since it is very often not earmarked, it can also be used as a loan for a car repair.
Installment loans are available from 1,000 dollars up to tens of thousands of dollars. This covers every major repair need. Depending on the provider, the term is between 12 months and 10 years. The rate burden can be controlled by choosing the term. With a 5,000 dollars loan, an effective interest rate of 6.00% and a term of 12 months, for example, the monthly installment is 430 dollars, for 36 months it is 152 dollars.
No collateral is required for installment loans. Proof of regular income, secure employment and, of course, sufficient creditworthiness are sufficient.
2. Small and short-term credit
Small or short-term loans are not available through banks, but through special online providers. Possible loan amounts range from 100 dollars to a maximum of 3,000 dollars. This means that even minor repairs can be financed by loans. The term is extremely short and is usually only a few weeks, maximum three months. The loan must then be repaid at the latest. Such loans serve rather as bridging until the next or the next but one salary receipt. Within this limited framework, they can also be used to finance repairs. The advantage is: Especially with small amounts, the creditworthiness requirements are not as strict as usual.
3. Overdraft facility
At first glance, the overdraft facility is an easy and convenient way to finance a car repair. A separate loan agreement is neither required, nor does he have any fixed payment obligations. The loan can be drawn on at any time up to the granted overdraft limit. The repayment will be made “to your liking”. As a workshop customer, you are at least always liquid. However, the overdraft facility has a major disadvantage. It is more expensive than almost any other loan, and interest rates are often in the double-digit range. If the credit limit has already been exhausted or there is no overdraft facility, this financing option does not arise. Moreover, due to the high costs, overdrafting should only be the last resort of choice. (… more about balancing overdrafts with credit) … more about the types of credit
Use the loan comparison to find the cheapest auto repair loan.
Pay for car repair with a credit card If the workshop accepts credit cards, a repair can initially be paid for in this way. After all, this has the advantage that the card works like a loan that is free until the next billing. Billing is always carried out within one month. Either the outstanding amount must then be paid or a credit line can be drawn. This loan is usually repaid in minimum installments. Interest rates are “overdraft”, often even higher. The credit card is definitely not a “permanent solution” for car repairs.
Private credit a solution?
Loans from private to private – also called P2P loans – are now offered on the internet via corresponding credit platforms. Instead of a bank, users finance the proposed project and receive interest. Such a project can also be a car repair. However, enough financiers must first be found so that the desired loan for the car repair actually comes about. This can take time or not at all. Creditworthiness is also required and the Credit Bureau query is standard. The P2P loan does not offer a quick solution.
What should be considered when financing?
The same applies to auto repair credit: it must be sustainable. The loan repayment rates must be able to be “managed” from the current budget. This can be checked with a household bill, which is often automatically part of a bank’s credit assessment. Several loan offers should always be compared to find the cheapest loan. A good benchmark is the APR, which has to be given when offering to consumers. In addition to interest, it also includes other credit costs.
How does lending work?
The online application – common today – takes just a few steps. Information about the desired loan, the borrower and personal and economic circumstances is requested. This is followed by a credit check using scoring and – hopefully – a preliminary loan approval. The loan application must then be printed out, signed and sent to the bank along with other documents (pay slips, bank statements). For new customers, an authentication test (usually using the postident procedure) is also required. The bank checks the documents, signs the contract and initiates the transfer of the loan amount. Depending on the processing time, this can take up to two weeks or longer.
If you have to go fast – the instant loan
However, the loan is often needed very quickly for repair financing. Here is an instant loan. This is also an online loan, in which a few steps are “shortened”. In particular, postal shipping is largely dispensed with. The loan application can then be digitally signed, documents and evidence can be scanned and sent electronically. Instead of the Postident procedure, video identification takes place on the screen. This speeds up the lending process and the money is in the account within three or four days.