When it comes to building an emergency fund, we all know that it is one of the best ways that can help us to tide over unexpected financial crises. However, due to a lack of funds or due to too many financial obligations, it is not always possible to build one. But that does not necessarily mean that you do not have other options to pay for the cost of your car repairs.
Let us find out how you will meet the expenses of auto repairs if you are facing a financial crunch.
Not all drivers are equipped to meet expenses
As per a survey that was conducted by AAA, for the cost of maintaining and repairing a car annually, you must be prepared to shell out approximately $1200 (taken on an average). And surprisingly, not even 1/3rd of the total drivers are equipped to fund these expenses.
And this becomes a real problem if the costs that you have to incur are not covered by insurance carriers or you do not have a warranty against these repairs. But that should not disappoint you because there are other options too. And some of them are explained in the paragraphs that follow. So, if you have been wondering about how to finance auto repairs, your search ends here.
Your auto repair financing options
You can go through the options mentioned below-
Take out a personal loan
This is one of the options that you can explore so that you can fund repair and maintenance for your cars. Approach banking or any financial institution for a personal loan. Also referred to as installment loans, you have to repay the loan amount every month over a period of time and you are expected to repay the entire amount within the loan term.
A personal loan will attract interest rates along with fees. Find out how much you can save on interest rates. How much you can enjoy as interest depends on your credit history.
Payday loans are a quick way of accessing cash. You have to provide details of your bank account so that you can withdraw the proceeds. This loan is basically given to you against the paycheck that you will receive the following month.
However, you must be aware of the norms that govern the regulations of these loans in the state you reside in and also the APR or the Annual Percentage Rate that these loans will attract.
Sometimes, the cost of the loan (APR) can be as high as 400% along with additional fees.
Vehicle Title loans
This is another option for financing car repairs. Nevertheless, they are risky and for the short-term. The lender will offer you a loan against the car title. Once you are able to repay the loan, the duration of which is usually a month, you will get back the vehicle title papers.
However, it is risky because unless you are able to repay the loan, the car, which acts as collateral or security for the lender will be taken away.
Studies also reveal (Consumer Financial Protection Bureau), around 2/3rd of the borrowers that take out the loan against their car title roll over the debt payment for at least 6 times since they are unable to pay off the debt. And once there is a prolonged failure of repayment of the loan, the car title usually gets confiscated.
Aside from the above, you can also take out a loan with a credit card or apply for a conventional loan. While traditional or conventional loans are a better option as compared to using plastic cards, you have to take into account the rate of interest, the APR, loan term, fees, and additional charges, if any in case of traditional loans.