Personal Loans for Car Maintenance: Pros and Cons

Do you need to maintain your car but are cash-strapped? A personal loan is one way to help deal with financial burdens, but does it apply when trying to repair a vehicle?


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Updated 8 March 2023
Personal Loans for Car Maintenance: Pros and Cons
Sections on this page
  1. What Are Personal Loans?
  2. Pros of Using Personal Loans
  3. Cons of Using Personal Loans
  4. When a Personal Loan for Car Maintenance Makes Sense
  5. When a Personal Loan Doesn't Make sense

Opting for a personal loan to maintain your car is not a one-size-fits-all decision. In some instances, it works; in others, it is best to think of alternatives.

Ultimately, you need to analyze your situation and see whether a personal loan is worth it or if something else works best for you.

What Are Personal Loans?

You can take personal loans for any purpose, from car maintenance to home repairs to resolving debt. Numerous institutions, including banks, lenders, and credit unions, offer these loans.

Your reason for a personal loan will determine the type that you will get and will come with different terms. When it comes to these loans, a good credit score is vital to qualify and get low-interest rates. Regardless, you can still get loans with bad credit. The only downside is that you might have to pay higher interest rates.

Pros of Using Personal Loans

If you need to get your car fixed but don't have any cash handy, there are several benefits to applying for a personal loan. 

Substantial Sum of Money

Personal loan amounts are given all at once. Therefore, you enjoy receiving a significant amount of money, which can help solve immediate financial issues.

No Need for Collateral

Most personal loans are unsecured, meaning you do not need any collateral to get approved. This means you don't need to put up your car or any other asset as security to get the loan.

Quick Approval and Funding

Personal loans are processed relatively quickly. You can gain approval and receive your loan amount in as little as 24 hours after approval. This quick process is beneficial during emergencies.

Cons of Using Personal Loans

Although a personal loan may be a good option in some cases, there are a few downsides that you need to consider. 

Negatively Affects Credit

While making on-time payments can improve your credit score, missing a payment or default can cause your score to reduce significantly. In addition, lenders typically make a hard-credit inquiry when confirming your eligibility for a loan, which lowers your score.

More Debt

Personal loans can come in handy for emergencies, but taking a loan means you have an additional debt to worry about monthly. If you are not careful about how you plan your budget, you may find yourself in serious financial problems.

Extra Fees and Penalties

There are other fees besides the interest rate you may need to pay. These fees vary from lender to lender and include origination, application, and additional fees (some of which are hidden). 
Also, you may have to pay a penalty for late payments or insufficient funds (when money is automatically taken from your account).

Person applying for a personal loan

When a Personal Loan for Car Maintenance Makes Sense

Here are some conditions that can help you determine when to consider getting a personal loan for car maintenance.

Cost of Maintenance Versus Cost of Replacement

If you are low on cash and repairing your car is noticeably cheaper than replacing it, consider getting a loan. The loan should be enough to cover the cost of maintenance, and you will be able to pay it back in a short amount of time.

Good Credit Score

A good credit score can help you qualify for a loan at low-interest rates, making the process worthwhile. So, if your credit score is on the higher end of the spectrum, opting for a personal loan may be your best and most affordable option.

High-Interest Alternatives

Consider your alternatives if taking a personal loan is not on the table. For example, you might need to maintain your car using payday loans, credit cards, or other means. Typically, these alternate options have high-interest rates in the long run. So, if you look at all your choices and they all have high rates, a personal loan may be your best choice.

When a Personal Loan Doesn't Make sense

Sometimes, taking a personal loan for your car could cause more harm than good. Here are some instances when exploring other options is more practical.

Can You Make Your Monthly Payments?

Before applying for a personal loan to pay for car maintenance costs, make sure you're aware of your monthly payments. If you can't make these, a personal loan may become a financial nightmare for you in the long-term.

Low Credit Score

A bad credit score means the odds of qualifying for a loan are low. It becomes more challenging when you do not have a cosigner (i.e., anyone with good credit willing to apply for this loan with you). Your cosigner will make payments on your behalf should you fail to do so.

That said, getting loan offers with a bad credit score and without a cosigner is not impossible. Nevertheless, the higher rates of these loans may not be worth it.

Valid Car Warranty

If your car is under warranty, it may cover repair costs. Though the warranty does not fully pay for the repairs, it should be close enough that you can afford to cover the rest out of pocket. In such a case, you do not need a personal loan.

Expensive Cost of Maintenance

If the maintenance cost is close to the price of getting a new or used car, there may be a better way to go than applying for a personal loan. You should not be looking to repair the vehicle. Instead, consider getting a newer one by applying for secured auto loans because they typically have better terms and APR rates. 

Alternatives to Personal Loans

Personal loans have their benefits, but they do have their drawbacks. So, if you are looking for alternatives, here are a few.

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