In Canada, thousands of car accidents are reported each year, many of which cause severe damage to vehicles and harm to drivers. The financial burden of a car accident can prove to be too much for many car owners, leaving them with hefty bills to cover repair or replace their totalled vehicles.
Not only that but there may be additional costs associated with injuries and mental health issues that stem from serious accidents. If you’ve been involved in an accident with the vehicle that has left you with overwhelming bills, perhaps a car accident loan may offer the financial relief you need.
Key Points
- Car accident loans can help provide financial assistance required to cover the cost of bills associated with car repairs, lost work due to injuries, rehabilitation services, and more.
- Financing options include personal loans, home equity loans, and guarantor loans, to name a few.
- To increase your chances of loan approval with an affordable interest rate, give your credit score a boost, make a bigger down payment, add a co-signer to the loan contract, and pay down your debt before applying.
What Is A Car Accident Loan?
A car accident loan is a financing option that provides funds needed to cover the cost of things such as:
- Vehicle repairs
- Lost wages
- Physical or mental rehabilitation services
- Legal costs in the event that others are injured
With a car accident loan, your lender will provide you with the funds needed to cover these costs, after which you’ll repay the loan via installment payments that include interest (depending on the financing option you choose).
With a car accident loan, you can pay off your expenses in full upfront, then spread these costs over a longer period of time to lessen the financial burden of having to come up with the money right away.
Types Of Loans You Can Use To Cover Car Accidents
There are a number of loans you can use to cover your car and car-related expenses. Whether you need extra funds to cover your car repair, physical injury or legal costs, any of the following loans can help you do so.
Personal Loans
A personal loan can provide you with a lump sum of cash that you repay in installments over a period of time with interest. It is a great way to spread costs into affordable payments. Personal loans can either be secured or unsecured.
Secured Personal Loans
A secured personal loan is one that is backed by collateral, such as your car. When a loan is secured, it may be easier to get approved for since the asset backing the loan reduces the lender’s risk. You may even be able to get approved for a higher loan amount and a lower interest rate, as long as all other aspects of your financial and credit health are strong.
Unsecured Personal Loans
An unsecured loan does not come with collateral. As such, the lender has no asset of value to use to recoup their losses in the event of loan default. Because of this, unsecured loans may be a bit more challenging to get approved for compared to secured personal loans. Unsecured loans may also come with slightly lower loan amounts and higher interest rates.
No Credit Check Loans
One of the more common factors that lenders consider when you apply for a loan is your credit score. Good credit can increase your chances of loan approval at a lower interest rate. If you have bad credit, you may have difficulty getting a traditional loan.
Fortunately, there are options for bad credit borrowers, including no credit check loans. As the name suggests, a credit check is not required with this type of loan. That means those with bad credit or no credit at all may qualify for funding. Just keep in mind that no credit check loans may come with higher interest rates, making financing more expensive.
Guarantor Loans
Guarantor loans are another option for those who can’t qualify due to bad credit. This type of loan involves the addition of someone with good credit who co-signs the loan. The guarantor basically promises to take over loan payments in case the primary borrower defaults.
HELOCs
A home equity line of credit (HELOC) is secured against your home. You can borrow against the equity on your home, and your home collateralizes the loan. If you have a lot of equity accumulated in your home, you may be able to access a large sum of money to cover the cost of emergency expenses like a car accident.
Filters
- Amount
- Up to $35,000
- Rate
- 9.99% – 35%
- Term
- 9 – 78 Months
- Amount
- Up to $60,000
- Rate
- 19.99% – 34.99%
- Term
- 6 – 120 months
- Amount
- $500 – $10,000
- Rate
- 12.99% – 34.99%
- Term
- 9 – 60 months
- Amount
- Up to $10,000
- Rate
- Varies by product
- Term
- Varies by product
What Are The Requirements For A Car Accident Loan?
Depending on the lender and type of financing option you choose, the requirements to qualify will vary. However, in general, there are a few factors lenders will consider when evaluating your application:
- Good Credit – Banks, credit unions, alternative lenders and any other financial institution you apply with may require a credit check to determine your creditworthiness. Traditional lenders will require good credit for you to get approved for a loan. With bad credit, you may have a more difficult time securing a loan.
- Strong Income – Lenders will also want to see that your income is high enough to support regular monthly payments towards paying off your loan. To prove your income, you’ll need to show them certain documents, such as pay stubs and bank statements.
- Low Debt – Lenders will also check your debt-to-income ratio to see if you’re able to afford another loan. If you don’t have much money left over after all your bills are paid every month, you may be turned down for a loan.
- Collateral – If you’re taking out a secured loan, you’ll need to provide appropriate documents to show the value and ownership of your asset.
What About Insurance Payouts For Car Accidents?
Depending on your situation, you may have enough money from an insurance payout, so you wouldn’t need to take out a loan to cover costs associated with a car accident. No matter who is at fault, standard accident benefits should apply if you’ve been injured in a car accident. These benefits can help cover the costs associated with any necessary rehabilitation and lost wages.
Can I Get EI If I Can’t Work Due To A Car Accident?
Yes, you can collect employment insurance (EI) benefits if you’re hurt in a car accident and can’t work as a result. More specifically, you can receive these benefits for 15 weeks after an accident that prevents you from continuing to work for more than 2 weeks.
Learn more: How To Apply For EI In Canada?
Does Worker’s Compensation Cover Me If I’m In A Car Accident?
Workers’ compensation typically only covers you if you’re involved in a car accident while on the job. In other words, you must have been driving for work purposes in order for workers compensation to cover you if you get into an accident.
For instance, you may have been involved in a collision while driving to deliver supplies, visit clients, or pick up materials, outside of your regular commute to and from work. So, workers’ compensation would not cover you if you’re involved in a car accident on your own time.
Workers’ compensation is provincially regulated, so be sure to contact your provincial board to find out the details of coverage if you’re involved in an accident while working. For instance, in Ontario, injured employees must report their claim within 6 months of the date of injury date and may access a variety of benefits, including lost wages.
Should You Take Out A Car Accident Loan?
In many situations, a car accident loan may be a good idea. But there are some cases in which a car accident loan may not be worth it.
| When A Car Accident Loan Is A Good Idea | When A Car Accident Loan May Not Be Worth It |
| There’s a delay in your insurance payout. | You have other financial resources readily available. |
| Your accident caused you to be unable to work due to physical injury or mental stress. | Your income is not high enough to comfortably cover additional debt. |
| You need rehabilitative services that are not covered under your provincial health care plan. | Your expenses are covered through insurance. |
| Your vehicle is damaged and you need it repaired right away. | The expenses related to the car accident are minor. |
You Have A High Deductible
If your car has been extensively damaged, your insurance policy may not be enough to cover the cost of the full repair. Or, perhaps your deductible is very high, which your current finances cannot support. In these cases, a personal loan can help you cover the repair costs.
If your vehicle is undrivable and you need to rent a car while your car is being repaired (and you don’t have insurance for a rental car), a personal loan may help with these urgent transportation needs until you receive your settlement from your insurance provider or the other party.
You Don’t Have Gap Insurance
If you still have an outstanding car loan balance and your car is totalled, your insurance provider will pay out the settlement to your lender. But if that amount is not enough to cover the entire remaining car loan balance, you’ll be required to pay for this out-of-pocket.
A gap insurance policy would cover this difference. But without this policy, you’re left paying the difference on your own. In this case, perhaps a car accident loan might make sense, as you can use the funds to cover the difference.
Learn more: Gap Insurance For Your Vehicle
There’s A Delay In Your Insurance Payout
It can take time for your insurance company to provide you with payment. Until then, you’ll need to cover any costs associated with paying for car repairs or rehabilitation services from an accident yourself. If cash flow is tight, a personal loan can help cover costs.
A personal loan might also be a better alternative than using a credit card with high interest rates. If you have decent credit, you may be able to get a personal loan with a much lower interest rate than what you’d pay on a credit card.
Your Insurance Claim Is Denied
If your injury has hampered your ability to work, a personal loan can help cover costs until you’re healed and back on your feet. Plus, if you need extra health services that aren’t covered under your provincial health care plan, a personal loan can help cover these costs too, such as crutches, mental health services, wheelchair rentals, and others.
Final Thoughts
Car accident loans can be a financial blessing and can help alleviate some of the stress that comes with dealing with an incident. Before applying, be sure to evaluate your options, understand the terms of the loan, and do some comparison shopping with a tool like CompareHub to see where you can get the most affordable loan.
