Facing unexpected car repairs with bad credit can feel overwhelming.
Explore the world of emergency loans. Consider online subprime lenders and last-resort options like title and payday loans.
Use the fast and easy online lending networks for people with adverse credit. Beware the high costs and potential debt traps associated with no-credit-check options.
Discover how soft inquiries let you shop around without impacting your credit score. Search your files for extended warranties before taking on new debt.
Repair Loans With Credit Check
Drivers with bad credit history often fare better by borrowing from online lenders who pull their consumer reports. Unsecured personal loans work best for emergency car repairs.
- You get a quicker decision when the lender does not have to evaluate collateral. Appraising the value of a home, car, or jewelry is time-consuming.
- Loans with monthly installments are easier to afford. You are less likely to fall behind when you have more time to repay the money.
Online Lenders
Speed is crucial when you must pay for unexpected car repairs. Drivers with bad credit can easily waste time working with financiers likely to decline them.
Working through an online network boosts approval odds in two ways.
- Submit your loan request once through an online form. Instantly, a vast network of subprime lenders see your profile and bid on the opportunity to contact you.
- Subprime lenders specialize in working with consumers with adverse payment histories on their credit reports. They approve a higher percentage of loan requests.
(Sponsored Link)
Ensure a fast answer by having the following information ready.
- Employer name and phone number
- Driver license number
- Social Security number
- Bank account and routing number
- Total balance of unsecured debt
Loan Alternatives
Lenders often decline loan requests from applicants with poor credit, even online subprime lenders. You may need another way to fix your car.
Emergency money for car repairs could be hidden in your files. It happened to me. I needed a new transmission and forgot that my auto insurance policy included an extended warranty.
I added the warranty option to the insurance to avoid surprise bills. Years passed, and memories faded. I paid for the transmission upfront.
Please double-check your warranties before borrowing money. It’s easy to forget these add-on purchases, as I did. The insurance company ultimately paid for my new transmission two years later. I discovered the coverage and filed a claim.
Soft Inquiries
Many online lenders will prequalify car repair loans without a hard credit check. They make soft inquiries to see if you pass the first part of their criteria.
Soft inquiries appear only in the reports consumers see. They do not affect your credit score or hurt your qualifications with other lenders when shopping around.
The lender may make a preliminary loan offer based on the soft inquiry and employment and income information from your completed online form.
If you agree to the loan offer, the lender will move to the second evaluation phase, which has three key steps.
- Make a hard inquiry to prove that nothing changed on your report.
- Verify income, employment, and regular bank account deposits.
- Calculate a debt-to-income ratio to determine loan affordability.
Affording the monthly payments can help overcome a history of delinquency. Keep the loan amount small. Consider waiting on less urgent repairs.
Repair Loans Without Credit Check
Drivers with bad credit should only use lenders who skip credit checks as a last resort. Their short-term loans can turn emergency car repairs into a cycle of growing debt.
Title Loans
Title loans do not entail credit checks. A title loan allows you to borrow a small amount to fund emergency car repairs by using your vehicle’s title as collateral. They have several caveats.
Availability
Title loans are not available to fund every car repair job. You must live in specific states or own the vehicle outright.
- You cannot use a title loan if you still owe money on the car. The bank holds the title until you finish making all auto financing payments.
- Title loans are illegal in many states due to the high monthly fees. Currently, twenty-four states allow them, while twenty-six do not.
High Costs
Title loans are expensive. They have short repayment periods of 30 days and charge high origination fees. The average monthly fee is 25%.
Suppose the repair shop returns a written estimate of $1,000 to get your vehicle back on the road. The lender will provide the $1,000 upfront in exchange for the title. You must repay $1,250 in thirty days.
Debt Trap
Title loans can quickly mire you into a debt trap if you cannot repay the entire balance in thirty days. The average borrower takes seven months to repay the balance.
This chart projects the fees if you repay the loan in four months. In this example, a $1,000 repair job costs $565 more.
| Month | Payment | Principal | Fee | Balance |
|---|---|---|---|---|
| 0 | $0 | $1,000 | $250 | $1,250 |
| 1 | $625 | $625 | $156 | $781 |
| 2 | $390 | $390 | $98 | $488 |
| 3 | $244 | $244 | $61 | $305 |
| 4 | $305 | $0 | $0 | $0 |
| Total | $1,565 | $565 |
Repossession
Because you pledge your car as collateral, the title loan lender can repossess your vehicle should you fail to pay. As you can see from the example above, balances can balloon quickly with a 25% monthly fee.
Roughly 20% of title loans end in repossession.
If you lose your transportation, the repair job will be even more expensive. To avoid this calamity, plan to repay the entire balance promptly.
Payday Loans
Payday loans do not require credit checks. A payday loan lets you borrow a small amount to fund emergency car repairs by pledging money from your next paycheck.
Like title loans, payday cash advances have short repayment periods and high origination fees. They trap many borrowers in a cycle of escalating debt, and for these reasons, they are not legal in every state.
Unlike title loans, payday cash advances are unsecured. If you default, the lender cannot repossess your car. However, they can file a lawsuit to garnish wages or attach a lien against your property.
Have a plan to repay the balance promptly.
