Unexpected car repairs are frustrating and stressful. Experts suggest stashing away a considerable amount of money to cover these expenses, as they are not completely unforeseen. Over time, normal wear and tear reduces your car’s performance. You will need to change tyres, for example, or you will need to get a clinking sound in the engine fixed.
Though savings for car repairs are recommended, most of the people fail to have enough money. Fortunately, there are some funding options to help cover these expenses when your savings have fallen short of cash.
Ways to finance unforeseen car repairs
Here are the ways to finance unforeseen car repairs:
- Garage payment plans
Various garages partner with financing companies to provide low-interest payment options. Ask the garage if they have any payment plans. You will only be required to pay a fraction of the repair cost upfront, and the remaining balance will be spread across a few months. The length of payment plans usually lasts for up to six months.
Some of the plans do not charge interest as long as you make payments on time. Ask around before jumping at the first offer.
- Emergency same-day loans
Emergency same-day loans from a direct lender come in handy only when you need a small amount of money. Make sure that your credit score is not extremely poor; otherwise, lenders might refuse you.
Before you apply for these loans, ask your lender the maximum limit of the loan size. Some lenders do not approve more than £500, while others could be willing to lend up to £700. Knowing the disbursal limit beforehand will ensure that you do not borrow more than the maximum limit, which would otherwise cause rejection.
- Bad credit loans
If your credit history is subpar, bad credit loans could be the best alternative. Since these loans have been designed to target subprime borrowers, you will not be refused on grounds of a poor credit history.
However, sometimes lenders may ask you to arrange a guarantor if you are looking to borrow a large sum of money. There are some direct lendersthat offer bad credit loans with no guarantor, but they will charge very high interest rates.
- Credit cards
Credit cards can also be beneficial when you need a small amount of money. Standard credit cards charge interest rates, but if you fail to pay off your balance within the grace period. When your bill is generated, you will be given some time period to pay off the balance in full. This is called a grace period or interest-free period. If you fail to settle your account within the given period, interest will start accruing by the day.
If you have a 0% credit card, you do not have to pay interest at all. You will pay down the balance in fixed instalments over a limited time period. The interest-free period could be between 12 months and 18 months. It is suggested that you settle your bills within that time. Otherwise, 0% credit cards will prove to be more expensive than standard credit cards.
- Personal loans
If you need a large amount of money to have your car repaired, you can consider taking out personal loans. These loans are available from direct lenders and banks too. At the time of using these loans, you should be careful about your repayment capacity, as they charge slightly high interest rates.
This is because the risk of default is high and lenders do not have collateral to cover their money back. Personal loans are usually approved when your credit rating is stellar, but it does not insinuate that bad credit borrowers are not eligible for these loans.
Subprime borrowers end up qualifying for even higher interest rates. You should exercise caution when you decide to take out these loans.
- Budgeting loans
Budgeting loans are provided by the government. They are interest-free loans. The size of a loan amount is so small that these loans are effective only to meet small expenses. Though you do not have to pay interest, you will need to pay back what you borrow.
Things to keep in mind while using these loans
There are various financing options to cover the car repair bill, but they all work differently. You should ensure that you choose the right option to protect your finances. Here are some essential things you need to keep in mind:
- Emergency loans only fund small expenses. There is no guarantee that a lender will approve up to £1,000 because your overall financial situation will be assessed. It means you might have to cover part of the cost of the repair out of your pocket.
- Funding car repair expenses through bad credit loans and personal loans could be very challenging as they charge high interest rates. If you fall behind on payments, you will end up escalating the cost of the debt. Over time, it will be even more challenging to keep up with the debt.
- Even though lenders claim to accept applications from bad credit borrowers, there is no guarantee that you will get approved. Your overall financial condition will be reviewed, and if they suspect that you cannot keep up with payments, they will decline you.
- Budgeting loans are interest-free loans that seem very appealing to you, but you must meet the eligibility. These loans are generally available for those who are on low wages and need money to cover urgent expenses.
- If you seek payment plans from your garage, carefully check the total cost of it. This is because the plans they offer are a buy-now-pay-later option. You might end up paying a lot of money.
The final word
In order to meet unexpected car repair bills, you can consider various financing options. They include emergency loans, bad credit loans, personal loans, and budgeting loans. Whatever option you choose, make sure you will not struggle with payments. There is a high chance of falling into debt.
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