How auto repair loans work
A personal loan for auto repair can help you quickly cover the cost of an urgent car repair. Here’s how getting a personal loan typically works.
Find the right lender and apply
Look for lenders that offer personal loans for auto repairs. With many lenders, you can easily apply online, by phone or at a local bank branch.
Provide your financial and personal information
Since personal loans are often unsecured, lenders may consider your credit score, income, debt-to-income (DTI) ratio and other factors when making a lending decision. Applicants with stronger credit may receive more favorable loan terms.
The lender decides and provides the loan terms
The loan terms consist of the interest rate, payment schedule and fee structure. Terms will vary based on the lender and your financial situation.
Receive the lump sum loan to pay for the repair
If approved, the lender will send the money directly to you. With Citi, you may receive the funds the same day via direct deposit into a Citi bank account.
Begin your repayment schedule
After the loan is issued, you’ll begin repaying it according to the payment schedule your lender provided. These fixed monthly payments include interest.
What can you use auto repair loans for?
While the purpose of your auto repair loan is to fix your vehicle, you can use the money for almost anything. Generally, it’s a good idea to take out only the amount you need to repair your car. Some uses for auto repair financing include:
- Getting a new set of tires
- Repairing or replacing a transmission or engine
- Replacing brake components
- Fixing damage from a car crash that isn’t covered in your auto insurance policy
Pros and cons of auto repair loans
Before you decide on car repair loans, it’s helpful to understand both the pros and cons of this financing option.
Pros of auto repair loans
There are several pros of personal loans for auto repair, including:
- Fast access to cash: With many personal loans, you can receive money within a few business days if approved.
- Simple application process: Applying for a personal loan is generally a straightforward process that you can complete online, over the phone or in person, depending on the lender you use. You’ll need to provide some personal and financial information, like your date of birth, income and Social Security number (SSN).
- Fixed payment schedule: A set payment schedule can help make budgeting easier. Plus, you know the exact payoff date for the loan.
- Flexibility to use the money for other needs: Though you may take out a personal loan for a car repair, you can use the money for almost anything.
- Timely payments may help build credit: Payments for personal loans are generally reported to the credit bureaus, meaning responsible loan management and timely payments could help your credit score.
Potential cons of car repair loans
Before you sign on for an auto repair loan, keep these potential cons in mind:
- Interest rates: Since personal loans are unsecured, they may have a higher interest rate than other types of secured loans. However, the interest rate on personal loans can be lower than on credit cards.
- Credit score requirements: These vary by lender, but because personal loans are unsecured, approval depends on your finances and credit score. If you qualify with a lower credit score, it may mean you’ll receive a higher interest rate.
- No revolving credit: Since personal loans are installment loans, you’ll receive a lump sum when you take out the loan and then pay it back over the subsequent months or years. If another financial need arises, you may need to take out another loan.
- Missed payments may hurt credit score: If you fall behind on the payments of your new loan, it could negatively impact your credit score.
Alternatives to auto repair loans
If you need additional funds to cover your car repair, you may look into other financing options. Here are some alternatives to auto repair loans:
- Check your insurance coverage: Before you pay out of pocket for a car repair, recheck your insurance policy. It may offer full or partial coverage, depending on the circumstances.
- Use a credit card: It may make sense to use a credit card to cover the repair if you plan to repay the balance quickly. Some credit cards may also offer periods of low interest on purchases, which may be beneficial if you qualify and need more time to come up with the money to cover the repair. Once the promotional period ends, you’ll start accruing interest at the regular rate on any remaining balance.
- Use funds from a savings account: Do you have money set aside in a savings account or emergency fund? A sudden auto repair could be the perfect reason to dip into that account.
Deciding whether an auto repair loan is right for you
There are a few things to consider as you decide if an auto repair loan is the right option for you.
Consider if you can afford to repay the loan
Review the proposed monthly payments to cover the cost of your repair. If you can comfortably afford the payment alongside your current bills, an auto repair loan may be worth considering.
Compare what loan terms are available
The loan terms you qualify for depend on your credit score, income and other factors. Check with different lenders to see and compare the terms they may offer you.
Take control of unexpected repair costs
Surprise car repairs don’t have to derail your finances. Whether you choose an auto repair loan, tap into savings or explore other options, understanding your choices empowers you to make the right decision for your situation.
With a Citi® Personal Loan, you can check your rate with no impact on your credit score.1
Citi offers personal loans to both existing and new Citi customers who meet specific eligibility criteria, including an established credit and income history, as well as additional factors determined by Citi. If you think you could benefit from a Citi Personal Loan, apply online today.
FAQ for auto repair loans
Can I get a personal loan for car repairs?
Yes, you can get a personal loan for car repairs. Many lenders offer unsecured personal loans that can be used for auto repair financing. These loans provide a lump sum that you can use to cover repair costs, and you’ll repay the loan through fixed monthly payments over a set period.
How to pay for car repairs if you can’t afford it?
If you can’t afford car repairs upfront, you have several options. You could apply for a personal loan for car repair, use a credit card with a low introductory APR, check if your auto insurance covers the repair or tap into an emergency savings fund if you have one. Compare your options to find the solution that works for your budget.
Is financing car repairs a good idea?
Financing car repairs through a personal loan can be a good idea if you need immediate repairs and don’t have cash on hand. It offers fast access to funds and fixed monthly payments, making it easier to budget. However, consider the interest rates and fees, and compare this option with alternatives like using a credit card or savings account to determine what works for your financial situation.
This article is for educational purposes. It is not intended to provide legal, investment or financial advice and is not a substitute for professional advice. It does not indicate the availability of any Citi product or service. For advice about your specific circumstances, you should consult a qualified professional.
1To check for offers you may qualify for, Citi conducts a soft credit inquiry. If you are presented with an offer and choose to proceed with the application process, Citi will conduct a hard credit inquiry which may have an impact on your credit score.
