Whether it’s traveling to work, getting your kids to school or heading to an important appointment, your car is a necessity — not a luxury. So it’s scary to see your check engine light come on or hear weird noises. Even worse, if your vehicle suddenly stops working, it can disrupt your schedule and take a toll on your finances.
Depending on the type of repair, the cost can be significant. According to J.D. Power, an engine replacement could set you back between $2,000 and $10,000. Charges vary by make and model, as well as equipment and local labor costs. Even if your car repairs are on the lower end, prices have gone up. According to the Bureau of Labor Statistics, the cost of motor vehicle maintenance and repair increased by 5.6% from April 2024 to April 2025.
If your car needs repairs and you’re short on cash, auto repair loans may save the day.
[Read: Best Low-Interest Personal Loans]
What Is an Auto Repair Loan?
Auto repair loans are personal loans you can use to cover vehicle repair costs. So if you need a new engine or car battery after yours breaks down or you have to replace all of your tires after running over nails or glass, you can get the funds to do so. You can also use a personal loan for other purposes, like debt consolidation, home renovations and big-ticket purchases. You may be able to take care of other financing needs in addition to your car repair with one loan.
How an Auto Repair Loan Works
Car repairs can be very time-sensitive, especially if you need to get back on the road as soon as possible. Auto repair loans from personal loan providers can supply quick financing — some lenders even offer same-day funding. That can help you resolve the issue faster and resume your normal life.
“Personal loans often have lower fixed rates and structured repayment, which can help avoid spiraling balances,” says Jordan Gilberti, certified financial planner and founder at Sage Wealth Group.
Car repair loans work by giving you a lump sum to cover the costs of fixing your vehicle. Often, these personal loans are unsecured, meaning they don’t require collateral. However, you may choose to use your vehicle as collateral to secure the loan.
Securing your personal loan may get you more favorable terms. However, it’s key to be aware that your car may be legally seized if you don’t repay the personal loan. In addition, secured personal loans can take longer to get, and that’s probably a factor if you need your vehicle back as soon as possible.
After receiving the funds to finance car repairs, you’ll repay the loan in monthly installments based on the repayment term. Personal loan repayment terms typically run between one and five years. How much you can borrow varies by lender and generally ranges from $1,000 to $100,000. In most cases, personal loans come with fixed interest rates that don’t change during the repayment term.
Your credit score, debt-to-income ratio, income, loan amount, repayment term and other factors determine your eligibility and interest rate. The annual percentage rate, or APR, on auto repair loans generally runs between 6% and 36%. If you qualify for rates at the lower end, a personal loan for auto repairs can be a much better option than a credit card.
According to the Federal Reserve, the average credit card APR on accounts that assessed interest was 21.91% in February 2025. Personal loans with a 24-month term had an average rate of 11.66% during the same time period.
“Using a credit card or personal loan for auto repairs can be smart in a pinch, but only if you understand the trade-offs. Credit cards offer speed and ease, but unless you can pay the balance quickly, interest charges can compound fast,” says Gilberti. “A personal loan, on the other hand, may take more time to secure, but typically offers a lower, fixed rate with predictable monthly payments. It’s important to shop around, compare APRs and choose the option that aligns with your cash flow and ability to repay.”
How to Get an Auto Repair Loan
If you need financial assistance to help you pay for car repairs, a personal loan can come in handy. You can borrow the money you need to fix the problem and buy some time to repay it. To get an auto repair loan:
1. Research different lenders. When looking for auto repair loans, contact several different lenders. Review eligibility requirements to see if you qualify. If you do, compare funding times, repayment terms and interest rates. You can find personal loans at banks, credit unions, financing companies and online lenders.
2. Get prequalified. Some personal loan lenders allow you to prequalify risk-free (without generating a hard inquiry on your credit report). Through this process, you can see whether you’re eligible and check potential rates.
3. Apply for a car repair loan. Once you get prequalified and have chosen a lender, you can submit your application for an auto repair loan. Typically, you’ll provide your ID and income information, such as a pay stub. Read the fine print and understand your legal obligations and the terms of your loan. Lenders may impose origination fees or prepayment penalties — you’ll want to check. For example, Upstart’s origination fees run from 0% to 12%.
4. Receive funds. After approval, the lender will issue your funds.
5. Fix your car. Now you can use the loan appropriately and complete your auto repairs so you can get back behind the wheel.
6. Make monthly payments. Start making monthly payments on your personal loan. Your repayment term and fixed rates give you predictability to help you budget. To reduce interest charges, you can pay more than the minimum. Be sure to ask your lender if there are any penalties if you pay off the loan early.
[Related:Should You Use a Personal Loan for Your Business?]
Alternatives to Auto Repair Loans
Personal loans for auto repairs can be a solid financial tool. However, there are alternatives to consider.
— Auto insurance policy. See if your car insurance coverage will pay for damage. If you need repairs due to a car accident, collision insurance can help. For repairs due to floods, theft or rocks, comprehensive coverage can kick in and pay for it. You’re responsible for the deductible, which is taken out before insurance pays out on your claim.
— 0% APR credit card. If your credit is strong, you may be eligible for a credit card with a 0% APR introductory rate. These cards offer 0% interest during a six- to 24 month promotional period. You can charge your auto repairs on the card, clear your balance within the promotional period and pay no interest. After the interest-free period ends, the APR reverts to a higher rate. Carrying a balance with the higher interest rate can be costly, so use this tool wisely.
— Car warranty. If you have a car warranty, some repairs may be covered. Review your owner’s manual for more information.
— Buy another car. Before deciding whether to take on an auto repair loan, consider if it’s an absolute necessity. “If the costs of the repairs are approaching or exceeding the actual value of the vehicle, or if the vehicle is likely to need more expensive repairs soon, it may be worth considering putting that money towards a more reliable car instead,” says Christopher Jackson, a certified financial planner and owner of CPJ Financial. “That said, if you do decide to finance repairs, it’s important to weigh the total borrowing cost, interest rate, fees and your ability to repay.”
To prepare for the future, Jackson says, “It’s a good idea to set up a separate savings account just for car expenses. Whether it’s for routine maintenance, unexpected repairs or even getting a head start on saving for your next car, having that money set aside helps you stay ahead of the curve.”
The Bottom Line
An urgent car repair can be stressful and throw a wrench in your plans. It can also be a budget killer if you have limited funds. Auto repair loans may be able to provide the money you need to fix your car — with the speed you need and a payment you can afford.
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Your Check Engine Light Came On: How Will You Pay to Fix It? originally appeared on usnews.com
