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The majority of U.S. consumers do not have enough in savings to cover a car repair and must borrow funds to pay for the expense. In many cases, the consumer will charge the fee to a credit card. This is not always an option. One alternative is to use a personal loan.
Factors Lenders Consider for Personal Loan Approvals
Financial institutions consider several factors before making decisions on personal loan applications. Your credit history is an important factor. The three main credit reporting agencies analyze FICO credit scores. FICO divides its credit score system into five categories:
Lenders sometimes require proof of employment to confirm consumers have the financial means to pay back the financing. Your monthly income minus all your other expenses should exceed what you need to pay monthly on a personal loan. Some lenders dive deeper into your credit history to determine if you have recently added a few credit cards to your wallet.
If you want to see what the lenders see when they look at your credit history, you can request a copy of your credit report. We encourage you to take advantage of a federal law that allows consumers to request a free credit report from each of the three primary credit reporting bureaus (Equifax, Experian, and TransUnion) one time per year. Knowing your credit score gives you an idea on whether you will be approved for funding.
You can also sign up for a credit monitoring service, which runs on average between $10 and $15 a month. If you require credit reports on demand, this might be a good solution for you.
How to Apply for a Personal Loan that Covers the Cost of Auto Repair
You do not have to apply for a car repair loan to get this type of funding. A far-reaching personal loan can be used to cover this type of expense. To get started, you must submit an application that includes personal information such as your name, mailing address, phone number, electronic mail address, and Social Security number. A lender needs your Social Security number to run a credit check and validate your identity. You can also expect to present paycheck information and the name and contact information for your employer. If self-employed, then bank statements demonstrating your financial status should be enough information for a lender to make a personal loan application decision.
The advent of online banking has made applying for a personal loan a much easier process. If your financial house is in order, you can receive a pre-approved personal loan application in a matter of a couple of minutes. Personal loans for a car repair that run more than $1,000 may require you to meet with a personal loan officer at the financial institution. A vast majority of unsecured personal loans do not require you to put up collateral. You might be able to make an arrangement for the lender to automatically deduct monthly payments from a bank account.
What to Look for in a Lender
Lenders that approve personal loans for car repair share many characteristics. Interest rates for good and excellent credit scores tend to be on the lower side. Online loan terms vary depending on the amount of money requested, but you want to work with a lender that is flexible in how long you have to pay back a personal loan.
You will likely not be allowed to backload a personal loan to account for a job layoff or a costly emergency expense. The lender you decide to work with should be quick to return phone calls and email messages. Finally, research prospective lenders to determine how long it takes each lender to make decisions.
If your credit score rates are bad or poor, make sure to exercise all lending options before you consider taking out a short-term personal loan. This type of funding can come with financial strings attached that make the loans cost prohibitive.