Car repair loan

Say what? A car repair loan? Well now we’ve heard of everything! But it makes sense, doesn’t it? If you can’t afford to upgrade or trade in, repairing your car for any major dings or mechanical problems may be the way to go. After all, you love your car to the max, and wouldn’t want to part with it anyway, right?

Car repair loan options 

If your average full service costs around $400, you can imagine what a minor repair costs, let alone a major one. And if it’s not the right time to say goodbye to your vehicle then taking out a car repair loan may be the best thing you can do. Here’s a list to get you started: 

  • personal loan (great option) 
  • credit card (okay option) 
  • payday loans (bad option) 

But how good is a personal loan and how bad is a payday loan? We’ve weighed them up to give you a better understanding of what your loan options are, before you go ahead with your car repairs.

Loan type Pros Cons
Personal loan Whether you choose a secured or unsecured loan, you’re sure to seal yourself a reasonable and affordable deal. Expect to pay anywhere between 6 - 10% Miss a payment, even one, and not only will you be charged a late fee, but a strike against your credit history.
Credit card Can be a pretty good option if your first year is 0% or a fairly low interest, but what about the following year? A good option if you plan on repaying your debt within the promotional time-frame. Just like a personal loan, expect to suffer the consequences if you miss a payment. Didn’t finish paying the debt within the promotional period? Expect to pay up to 23% the very day after your promotional period has ended.
Payday loan Instant dollars (up to $1000)  to get you through until your next payday, if you’re running short of a few bucks and especially if you need that repair booked right away. Preying on the vulnerable, payday loan lenders offer quick solutions for when you’re at your weakest and need a super fast solution. However, they have the highest rate around. At first glance they may seem comparable to a high credit card at 20%, but you’ve usually only got 2 weeks to pay. If you don’t pay off your entire loan by the agreed time, you will have to pay a further 20% on top. Take another 2 weeks to pay and accrue another 20%.

So as you can see, although you can save on interest in the first year by signing up with a credit card that has a 0% promotion, you’ll get stuck with high interests in the subsequent years after the honeymoon period has ended. A payday loan sounds promising at first but has a nasty bite if you don’t pay off your debt within the typical 14 days and can have you paying hundreds or thousands of dollars more than the original value. Mozo recommends you stay well clear of payday loan options. 

The personal loan however, seems to offer a more rounded approach to manage your debt with a better average on the interest rate charged, so you’ll be paying less in the long run, even though the first year may be higher than a credit card with 0% promotion. Think about it first, but if you can secure a personal loan, that’s the one to go for. 

Tips on cutting down your car repair bill 

Sure your car represents you, (it’s your giant handbag of choice and your personal mobile space) but do you need to get all the repairs done at the same time? Let’s explore a few ways you can reduce your car repair costs, even if it’s a short term fix.

  • Dealership repair vs local panel beater - yeah it’s pretty cool getting served an espresso and a fancy cookie just for stepping into your dealership, but wouldn’t it be nicer saving hundreds of dollars by going to your local service team? Okay, so they may wear grubby overalls and have a crackly radio station blaring instead of sweet ambiance of Ella Fitzgerald, but you’re going to save sooo much. With the money you save on your repair, you could buy an espresso machine for your home and a fine selection of biscotti from the deli round the corner. 
  • Less is more - well sort of. So you ignored your sensor beeping madly and backed into that pole that you didn’t see. It happens! Now your tail light’s out and you’ve got a ding you can’t stand. But it’s going to cost more than you can afford right now. Instead of feeling desperate to iron out that mess, prioritise and split up your expenses. The tail light legally must get fixed, so do that first. Then when you’ve saved up a bit of cash or paid off some of your credit card debt, splurge on getting the rear end smoothed out to perfection then. There’s no real reason to get it all done at once. 
  • Shop around - rather than going with the first mechanic you see, it might be worth your while to ring around and ask for a ‘roundabout quote’. Yes, many will hesitate to give you a quote over the phone but you’re just wanting to gage at least a starting price. This is of course if it’s obvious to you what’s wrong with the car. If it’s not exterior and more mechanical, you may need to go in person and take the car in. Remember, don’t feel obligated to go with any one mechanic or panel beater. Build up the confidence to shop around for the best deal, even if it's out of 3 different service places. By doing this you will almost definitely save save save. 

Saving for an emergency fund 

Not fun, is it? Wouldn’t you rather save for something a little more awesome? Like a holiday? Anyway, perhaps you could split this emergency fund into different categories so you don’t feel like you're saving is getting the raw end of the deal. Saving for fun stuff like holidays, fancy clothes and shoes makes it more worthwhile, but when it comes to car repairs, you’ll be grateful that you did put money toward your emergency fund for any kind of unexpected expense. There’s nothing worse than feeling stuck in a rut because you can’t afford something you really, really need. Having the freedom to get around in your car is pretty necessary these days, and there's only so many buses and taxis you can catch. So start by putting $5 a week, $10 a week and slowly increase it. You’ll hardly miss it anyway. In no time you’ll have a wad of cash under your mattress or in your bank that you didn't have before. 

Saving tip 101: better to save money in a high interest savings account you hardly use so that you’re not tempted to use the money until or if you need it. Out of sight, out of mind.