Owning a vehicle can be pricey. Although gas, registration, and insurance make up a significant portion of your car costs, repairs are often the most expensive problems. In fact, depending on what kind of car you have, a simple part replacement or fender bender can cost hundreds, even thousands of dollars to deal with.
Luckily, there are plenty of financial solutions that can help you cover the cost of those pesky but important car repairs.
Types of Financing Available For Car Repairs in Ontario
Here are some of the main ways drivers finance their car repairs:
Auto Title Loan
This product allows you to leverage your car’s title as collateral for a secured loan. You’ll have to own said title to qualify, this means there can’t be any liens or existing loans on the vehicle. Additionally, the car must have some resale value. If your car is eligible, most lenders will deposit your loan into your bank account, which you can use to finance your car repairs, then repay in installments over a predetermined period.
Benefits
- If your vehicle has a decent value, it’s usually easier to qualify for a large amount of financing.
- Because there is security for the lender, they may offer you more credit at a better price than other forms of car repair financing in Ontario.
Drawbacks
- The lender owns your vehicle’s title until your debt is fully paid, so they’ll have the legal right to seize and sell the car if you miss too many payments.
- Repayment terms can be short (sometimes only 30 days). As such, many auto title lenders charge much higher interest rates than with forms of financing.
Check out if you can get an auto title loan without a clear title.
Auto Equity Loan
Similar to an auto title loan, this financing option involves using your car’s resale value to apply for a secured loan. The main difference here is that you don’t need to own your car outright to qualify. Instead, you’ll leverage your vehicle’s equity as collateral. You only need to be registered to drive the car and have comprehensive, as well as collision insurance to become eligible (with most lenders).
Benefits
- Approval is mostly based on how much equity/value your car has, making this a good solution for drivers with bad credit or weak finances.
- Some auto equity lenders offer longer repayment terms than auto title lenders or other car repair financing sources.
Drawbacks
- Auto equity loans can also come with high rates and fees. The shorter your loan term is and the more risky you’re considered, the more costly the deal will be.
- Even if you don’t own the car, your lender will still be able to repossess and resell it if you default on your payments.
Personal Loan
A personal loan also involves a lump sum of money being deposited directly into your bank account. However, it’s a much safer option because you probably won’t have to offer any collateral to qualify (although secured personal loans may be available). Once again, you would ideally use your loan to cover your car repairs, then repay the lender through divided installments over several months or years.
Benefits
- They are more accessible than auto equity or title loans. Most banks, credit unions and alternative lenders offer some form of personal loan.
- Many personal loans come with lower rates and fees, as well as longer repayment plans than other types of car repair financing.
Drawbacks
- If your lender reports to Canada’s credit bureaus (Equifax and/or TransUnion), any late, short or missed payments could damage your credit score.
- It can be hard to qualify for decent loan conditions if you don’t have good credit, a high income or security to offer (this is more of a problem with prime lenders).
Payday Loan
If you have really bad credit or a relatively low income, payday loans can be a viable last resort for covering minor car repairs, since they have less strict approval standards than most other forms of financing. They are also readily available across Ontario, both online and at physical sales locations. Most payday loans come in small amounts of $100 – $1,500 and have repayment terms of 14 days following deposit. Just keep in mind that payday loans have extremely high APRs and should only be used as an option of last resort. Taking out a payday loan is almost always a bad financial decision.
Benefits
- It’s very easy to qualify for a payday loan. Most of the time, no credit check is necessary and you need minimal personal/financial documentation to apply.
- Payday loans can be processed, approved and deposited within 1 – 2 business days, making them a good solution for emergency car repairs.
Drawbacks
- Most payday loans come with extremely high interest rates (300% – 500% APR in some cases). Plus, 14 days may not be enough time to repay your loan.
- Your loan might not be large enough to fully cover your car repairs. There’s also more possibility of the “lender” being a scam artist or charging predatory rates.
Credit Card
In the end, most Ontario drivers will simply use their credit cards to finance car repairs or maintenance issues. After all, it’s one of the easiest and most convenient options, as long as the cost of your repair issues doesn’t outweigh your credit limit. Not to mention, credit cards are fairly standard financial products, so it usually isn’t too hard to qualify for a credit card with appealing conditions.
Benefits
- Credit cards are slightly less risky than most loans. No collateral or cosigners are necessary for approval and repossession won’t be a danger.
- You can make minimum or partial monthly payments to avoid penalties. Some cards also come with perks, like travel points and balance protection insurance.
Drawbacks
- Interest rates and fees can also be high here, especially if you consistently make minimum or partial payments (interest applies to any unpaid balances).
- It can be easy to rack up credit card debt. Any incomplete or defaulted payments can lead to extra interest/fees and decrease your credit score.
What Kinds of Repairs Can You Cover With a Car Repair Loan in Ontario?
Unfortunately, even a cheaper car can require pretty expensive fixes from time to time. Don’t worry, because a decent sized loan can help you pay for almost any repair or maintenance problem, including but not limited to:
- Damaged fenders, cracked windshields, or other bodywork
- Exhaust, powertrain, suspension & transmission issues
- Leaky fluid containers (gas tank, oil reservoir, etc.)
- Belt & hose changes (timing belt, bypass hose, etc.)
- Shaft replacements (driveshaft, camshaft, etc.)
- Engine components (gaskets, fuel injection system, etc.)
While an oil change or brake pad replacement may not be too pricey, major car repairs can cost a bundle to finance. For example, a new timing belt can cost well over $1,000 in parts and labour, not to mention the fact that your vehicle may need to stay at the auto shop for several days (and that’s if you find a trustworthy mechanic). So, a loan can be a huge asset, as long as you can handle your upcoming debt responsibly.
The Best Car Repair Lenders in Ontario
| Loan Amount | Intrest Rate | Loan Term | ||
 | $500-$50,000 | Prime to 35% | 3 - 60 | Learn More |
 | $500-$35,000 | Up to 34.99% | 12 - 60 | Learn More |
 | $500 - $10,000 | + 29.95% | Up t0 48 | Learn More |
 | - | - | 12 - 48 | Learn More |
 | $500 - $10,000 | 12.99% – 34.99% | 9 - 36 | Learn More |
How to Qualify For a Car Repair Loan in Ontario
Qualifying for a car repair loan depends on what type of financing you choose and which lending source you apply with. For instance, banks and other prime lenders have stricter requirements than most alternative lenders. Here are some of the requirements you’ll need to qualify for each type of car repair financing in Ontario.
Auto Title & Auto Equity Loan
- A credit check isn’t normally required when applying
- No liens or other outstanding debts on the vehicle
- Proof that you own your car’s title or that the vehicle has sufficient equity
- Proof of your comprehensive and collision insurance policies
- Agreement to use your car title/equity as collateral
Personal Loan
- A credit check is often necessary (especially with prime lenders)
- A good credit score (650 – 900) offers the best approval odds and interest rates
- A bad credit score (300 – 600) may be accepted but results worse loan conditions
- Stable employment and a decent income also lead to better loan conditions/rates
- A low debt-to-income ratio (ideally 30% – 35% or less) can also help
Payday Loan
- No credit check needed
- A stable income is most important (at least $1,000 – $2,000 monthly)
- An active bank account with direct deposit
- Basic personal and financial information (address, bank account details, etc.)
- Enough savings to cover your full loan debt (plus interest/fees) after 14 days
Credit Card
- Specific income level and credit score requirements depend on the provider
- You may need a strong credit history and income to qualify for a large credit limit
- Some cards require you to be a member of a particular bank or credit union
- The financial stability to cover your minimum monthly payments (at least)
- A clean debt payment history with no consumer proposals or bankruptcies
Documents Required For Car Repair Loan Approval in Ontario
Different lenders and financing types come with different approval requirements. That said, you’ll usually have to be a Canadian resident, over the age of majority in Ontario (19+), with stable finances, a bank account with direct deposit and a solid debt history to qualify for the best product conditions, credit amounts and rates.
Additionally, your lending source may need to inspect the following documents:
- Your Ontario driver’s license
- Other forms of government photo ID (passport, health insurance card, etc.)
- Your employment history and Social Insurance Number (SIN#)
- Your bank account details (for funding, payments, automatic debits, etc.)
- Your most recent bank statements and pay stubs (proof of income)
- Your credit report and credit score (from Equifax and/or TransUnion)
- Proof of car ownership (for auto title or auto equity loans)
- Proof of car insurance (for auto title or auto equity loans)
The Cost of Financing a Car Repair in Ontario
It can be difficult to judge exactly how much a car repair will cost you, until your mechanic tells you otherwise. Thankfully, it’s normally possible to get a basic estimation of how much a car repair loan would cost by speaking to your lender or visiting their website. You can also calculate this figure by considering these factors:
- Financing Amount – Most of your financing product’s cost depends on how much you borrow in the first place. When it comes to a loan, for instance, the more money you borrow, the more risk the lender is taking, so they may charge you a higher interest rate or give you a longer repayment plan.
- Financing Term – The longer your repayment term is, the more fees and interest you’ll pay overall, which is why a credit card with an open-ended term can sometimes be more expensive than a loan with a set term. Then again, products that have short terms can come with higher interest rates.
- Interest Rate – Typically, it’s easier to qualify for a low rate if you apply with a decent income, payment history, and credit score. The less risk you present, the better the outcome. However, as mentioned, large loans and short repayment terms can result in higher rates so the lender can maximize their profits.
- Fees – Every financing product, including a loan, can come with administrative fees for services the lender performs, like loan origination and document processing. Some lenders also charge for prepayments. Additionally, you could receive a late penalty or non-sufficient funds (NSF) fee for any missed payments.
- Security – If you apply with decent collateral, some lenders will offer better interest rates, larger credit amounts and longer repayment terms. That said, some severe financial consequences could occur if you default on too many payments, the worst being vehicle repossession.
Should You Repair Your Car or Finance a New Vehicle?
While it can be expensive and time-consuming, there are many scenarios where it’s totally justifiable to finance a newer car, rather than repairing your existing one. For instance, replacing your transmission could easily cost $4,000 – $5,000, which can go a long way toward buying a better used car or making a down payment on a new car.
Repairing Your Car May be Better When…
- Your current car isn’t fully paid off
- The repair or maintenance problem isn’t too expensive to fix
- You wouldn’t be able to afford a newer car
- You have bad credit, an unstable income or problems with debt
- Your car still has a value or very few issues
Financing a New Car May be Better When…
- Your existing vehicle has broken down or become unsafe to drive
- The repairs would cost more than the car’s market value
- Buying or leasing a car would be more affordable than constantly repairing one
- You’re looking for a more economic, reliable and/or fuel-efficient vehicle
- Your current vehicle has enough value to resell or make a trade-in
Looking to Finance Your Next Car Repair?
If so, a loan can be a major asset, as long as you know where to look and determine that the repair is truly worth the money. Thankfully, Loans Canada can connect you with trustworthy lenders and dealerships all across Ontario.
