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 a 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.
Take a look at these 6 hidden costs of buying a car.
Choose Financing Over a Credit Card
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.
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 personal 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.
Some auto shops offer their own financing programs or partner with a loan company that will provide financing and sometimes 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.
Secured vs. Unsecured Car Repair Loans
When you apply for a 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.
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. As we mentioned earlier, the presence of collateral during your loan application is a good way of increasing your approval chances and the possibility of getting a lower interest rate. This is an especially beneficial option when you have bad credit or low financial strength, which generally makes lenders think you are a risky borrower and less creditworthy because of it.
Looking for a bad credit car loan in Canada? Try reading this.
However, 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.
These types of car repair loans can be applied for without having to offer collateral of any kind, thus making them unsecured. They 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.
That being said, there are a few drawbacks to unsecured loans as well. Since you won’t be 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.
Still having trouble understanding secured and unsecured debt? Check this out.
How a Car Repair Loan Can Help You
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
- Light bulb replacements
- Seasonal rustproofing
- Hub-cap replacement
- Muffler patching and replacement
- Timing belt/chain replacement
- Air conditioning/heating maintenance
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
Wondering how much car you can realistically afford? Click here to know.
- New or custom paint jobs
- Tinted windows
- New seats
- Rust, dent, and scratch removal
- Custom additions (spoilers, rims, spokes, hubcaps, stereo system, etc.)
Accident and Damage Repairs
- Cracked/broken windshield or other windows
- Fender and bumper replacements
- Front and side airbag replacement
- General bodywork
Take a look at this infographic to compare new and used cars.
Are There Any Qualifications?
As with any type of loan, there are a few qualifications that must be met in order to be approved for auto repair financing. Depending on what lender you work with there might be some variation in the requirements but you should be prepared to meet the following:
- The amount you request cannot exceed the value of the car
- You must be employed for a minimum of 6 months
- You must have a bank account that has been active for at least 3 months
More often than not someone looking to finance their car repairs will meet all of these requirements so don’t let them deter you from applying.
What If I Have 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.
What are bad credit lenders looking for in a borrower? Find out here.
Other 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 kilometers 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?
Click here if you’re not sure whether it’s better to repair your old car or buy a new one.
Repair Loans Are For More Than Just Cars
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 labor vehicles
- Skidoos and other winter vehicles
Trying to get approved for a truck loan in Canada? Look at this.
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!