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📅 Last Updated: June 7, 2024
✏️ Written By Bryan Daly
🕵️ Fact-Checked by Caitlin Wood

With the way the weather and the roads in Canada can look from season to season, keeping your car in good shape can be difficult. In fact, owning a car of any kind can be pretty expensive, especially when maintenance issues arise and they usually happen at the most inconvenient time possible. If you’re currently dealing with this kind of situation, stop stressing, you have options. While you can use cash, credit cards, and other credit products to pay for many car-related costs, perhaps the pricier procedures are better financed using a car repair loan.

How Does An Auto Repair Loan Work?

Taking out a loan to finance your car repairs means that you won’t have to make one large payment to your mechanic; this is a great option for people who do not have a lot of liquid cash available for repairs that cost in the thousands. With a car repair loan, your interest rate will be more affordable than that of a credit card and you’ll have an easy-to-follow and reasonable payment plan. 

Once you’ve been approved for financing, your repair shop will be paid in full and then you’ll make affordable monthly payments until you’ve paid off the cost of the repairs.

Ways You Can Finance A Car Repair

When it comes to financing your car repair, there are multiple options you can choose from. Depending on the car repair loan you choose, it’ll have its own benefits and drawbacks. 

Personal (Installment) Car Repair Loans

When you apply for a personal car repair loan, chances are you’ll be offered two different financing options, known as “secured” and “unsecured” loans. Each option has a few benefits and drawbacks, so consider them carefully before you make a decision.

Secured Personal Loans For Car Repair

When you apply for one of these loans (or another form of secured credit), it means that you’re offering up a valuable asset, such as your home or another vehicle, to use as collateral, thereby securing your loan. 

Pros

  • Increase Approval Chances – The presence of collateral during your loan application is a good way of increasing your approval chances.
  • Lowers Rate – It also increases the possibility of getting a lower interest rate
  • Bad Credit May Be Accepted – When you add collateral to the loan it increases your credibility as a borrower. This is especially beneficial when you have bad credit or low financial strength, as lenders will see you as less risky. 

Cons

  • You Can Lose Your Asset – A drawback to offering up secured collateral is that you could potentially lose your asset if you miss too many loan payments or default on your loan agreement in some other way. In fact, when you offer an asset, your lender temporarily holds the title to it, which gives them the right to sell it to recuperate their loss in the event that they deem your debt “uncollectible”. Make sure to consider this before you apply for a secured car repair loan.

Unsecured Personal Loans For Car Repair

These types of car repair loans can be applied for without having to offer collateral of any kind, thus making them unsecured. 

Pros

  • Safer Option – Unsecured personal loans can be a much safer alternative simply because your assets won’t be at risk. If you default, you’ll likely receive a penalty charge or even legal consequences, but your assets will be safe from seizure.

Cons

  • Harder To Qualify – If you have poor credit and don’t offer any collateral, it can be much harder to qualify for the loan amount you want. 
  • Higher Rates – Moreover, without offering the lender any collateral compensation, it’s possible that your interest rate will be slightly higher. That higher rate can be very harmful to your finances and cause bad debt if you don’t factor it into your budget properly. 

Car Repair Payday Loans 

If you’re having trouble qualifying for a personal loan, you could opt for a payday loan. Payday loans are short-term loans that have extremely high rates that can range between 300% to 600%. You can only borrow up to $1,000 to $1,500, depending on the lender. These loans, like personal loans, has its pros and cons.

Pros

  • Fast Funding – Many payday lenders are able to approve and fund applicants within a couple of hours to a couple of days.
  • No Credit Check – Many payday lenders also do not require a credit check, making it a good choice for those with poor credit. 

Cons 

  • Payday Loan Cycle –  One of the main dangers of a payday loan is the payday loan cycle. Individuals who are unable to repay the loan can get trapped in a payday loan cycle. 
  • High Cost – Payday loans have a very high cost of borrowing due to its short terms, high rates and fees. 

What Does A Car Repair Loan Cover?

A car repair loan is exactly what it sounds like, an installment loan that’s designed to help you deal with your expensive car repairs. That being said, repairs aren’t the only vehicle-related costs that one of these loans can cover. You can also use a car repair loan to finance:

General Maintenance Costs

  • Oil, coolant, and other fluid changes
  • New batteries
  • Inspection costs
  • Seasonal tire changes
  • Seasonal rustproofing
  • Muffler patching and replacement
  • Timing belt/chain replacement
  • Air conditioning/heating maintenance

Cosmetic Improvements

  • New or custom paint jobs
  • Tinted windows
  • New seats
  • Rust, dent, and scratch removal
  • Custom additions (spoilers, rims, spokes, etc)

Overall Safety Improvement

  • New tires (all-season, winter, summer, etc.)
  • Head, tail, tag, and interior light repairs
  • Windshield or window replacements
  • New brake pads and discs, or other brake-related procedures
  • New airbags, seatbelts, and other safety features
  • New suspension, transmission

Accident and Damage Repairs

  • Cracked/broken windshield or other windows
  • Fender and bumper replacements
  • Front and side airbag replacement
  • General bodywork

Types Of Cars Covered Under Auto Repair Loans 

If you don’t want a repair loan for your primary car, don’t worry. You can use these loans to finance repairs for almost any other kind of commercial or recreational vehicle, such as:

  • Motorhomes, trailers, and recreational vehicles
  • Trucks and oversized vans
  • Motorcycles, dirtbikes, and other all-terrain vehicles
  • Boats and jet-skis
  • Tractors and other heavy labour vehicles
  • Skidoos and other winter vehicles

How To Qualify For An Auto Repair Loan?

As with any type of loan, there are a few qualifications that must be met in order to be approved for an auto repair loan. Depending on the lender you work with there might be some variation in the requirements but you should be prepared to meet the following:

  • Credit Score – Depending on the lender you work with, they may have a minimum credit score you must meet. If you have a bad credit score, you can still qualify for a car repair loan, but you may need to find a lender that accepts bad credit borrowers. 
  • Income Level – Lenders will require proof of income in order to assess whether or not you can afford to repay the loan. 
  • Debt Level – Another factor assessed to determine whether or not you can afford the loan is your debt-to-income ratio. The lower the ratio the higher your chances of qualifying and getting a lower rate. 
  • Employment Stability – Generally lenders require that you be employed for a minimum of 3 – 6 months. 
  • Bank Account – Lenders usually require you to have a bank account that has been active for at least 3 months. This is required for the funding and repayment of your loan. 

Things to Consider When Financing Your Car Repairs

Remember, as beneficial as car repair loans can be, they need to be handled responsibly if you want to avoid racking up more debt than you can handle. So, before you apply, it’s important to ask yourself questions like:

  • How much is the car itself worth? Should I take it to be evaluated before I apply?
  • How old is the car?
  • How many kilometres does it have on the odometer?
  • What is the total cost of the present repair or maintenance procedure?
  • Are these procedures going to be recurring problems?
  • Is it more logical or affordable for me to just purchase a new car?
  • Will the cost of this repair loan fit into my budget and can my income support it?

Auto Repair Loan FAQs

Can I get a car repair loan with poor credit?

Having a high credit score isn’t an absolute must when it comes to getting a loan. Finding financing for a car or car repair when your credit is less than great isn’t as hard as most people think or are led to believe. Whatever financial issues you might have when it comes to car loans and even personal loans you’ll always have at least a few different options to choose from. The main reason for this is because lenders tend to look at your financial history as a journey with many different parts, your credit score is one of those parts but it’s not the only thing that lenders look at.

Can I finance my car repair?

Yes, thankfully there are many lenders in Canada who offer loans to help cover the cost of an auto repair. A loan is often a good option for those who can’t afford to fork over a large lump sum of cash for a car repair. 

Should I use a credit card to cover my car repair? 

It can be tempting to use your credit card to pay for an emergency car repair, especially if you’re in a rush and need your car to be in working order right away. For a small repair that costs $100 or less, your credit card might be an ok option but for larger repairs that cost hundreds or thousands of dollars, using your credit card could double or triple the cost of the repair in the long run. High-interest rates, short payment cycles, and the constant threat of never-ending credit card debt are all reasons why you should not charge your vehicle repairs. Acquiring a small loan to finance a car repair, on the other hand, is a much smarter move.

Is it worth repairing my car? 

If the cost of your repair outweighs the value of your car, it may not be worth repairing your car. Instead, you may want to consider selling it and buying a new one.

Can I finance my car repair through my auto repair shop? 

Yes, however, it depends on whether or not your auto repair shop offers in-house financing. Some auto shops offer their own financing programs or partner with a loan company that will provide financing. Other times, you’ll have to seek financing from an outside lender. Whatever option you choose is up to you and the repair shop you’re working with.

We’ll Get You Back Behind The Wheel

We can work with the garage of your choice to pay off the cost of the maintenance and repairs and get you back on the road. Visit our auto maintenance loan application page and start the process today!

Caitlin Wood Priyanka Correia Lisa Rennie Bryan Daly Cris Ravazzano Margaret Johnson Kale Havervold Liz Enriquez Sean Cooper Veronica Ott Corrina Murdoch Chrissy Kapralos

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