Car breakdowns and accidents happen without warning. But what if your car breaks down or your check-engine light comes on with a week until payday? You may be left wondering how to pay for car repairs with no cash. Here are a few strategies that could help.
Strategies to Pay for Car Repairs
1. Dipping Into Your Emergency Fund
You may have heard it said that you should keep an emergency fund easily accessible for precisely this situation—an unexpected expense. But should you really use your emergency fund to pay for car repairs? Dipping into your emergency fund might be a solution if you don’t have other cash available to pay for repairs.
Using your emergency savings instead of reaching for your credit card could save money on interest and other applicable costs.
Of course, if you dip into your emergency fund, you may need to spend time building it back up so you’re prepared for any other emergencies.
What if you don’t have an emergency fund? Dipping into an emergency fund is just one way people may pay for unexpected car repairs—let’s look at some other common options.
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2. Using Insurance
Car insurance is designed to protect you if you get in an accident by covering some of the damage repair costs for the vehicles involved and the medical bills for someone hurt in the crash. This means that if your car trouble was caused by a crash, you might be able to turn to your insurance for help.
The type of coverage and circumstances can vary. For example, comprehensive insurance may help with some costs even if the accident didn’t involve another car, or if the damage was caused by an unexpected event, like a tree falling on your hood.
Collision insurance doesn’t typically cover damage caused by normal wear and tear. This means that your coverage may not include things like theft, vandalism, or weather damage.
There is one type of insurance—mechanical breakdown insurance (MBI)—that covers some types of repairs. Therefore, if you have damage caused by routine use of the vehicle and you have an MBI policy, you may want to check to see if the repair is covered.
Before going this route, consider whether using your insurance will actually be cheaper than paying out of pocket and if making an insurance claim will cause your insurance rates to rise.
The specific instances your insurance will cover should be laid out in your insurance policy. The amount of your policy deductible as well as the repair and type of coverage will likely be some factors you review with your insurance carrier.
3. Don’t Be Afraid to Haggle
Whether you have to replace multiple tires after driving over road debris or you have to install new brakes due to normal wear and tear, you may be looking at a hefty repair bill.
The good news is that car dealerships aren’t the only places where you can haggle over your car. Local car repair shops might be willing to cut you a deal to win your business.
Consider asking the repair shop for a written quote explaining precisely what is wrong with your vehicle, how the mechanic plans to fix it, and what the cost will be. Once you have this written estimate in hand, you may wish to get a second opinion. Sometimes auto mechanics will offer you a discount on a quote from another shop to get your business.
You could also ask the mechanic to limit their quote to only the essential repairs to ensure that they don’t try to upsell you on prematurely replacing all your tires when the problem you need addressed is your power steering.
Car repairs can also be a great time to reconnect with that great uncle or cousin who loves to tinker with cars. For simple maintenance, you may be able to barter with a friend or family member you trust—just make sure your vehicle is safe to drive before zooming off into the sunset.
4. Some May Choose to Put It on a Credit Card
It can be important to protect yourself against excessive credit card debt, but if you need to shell out hundreds, or even thousands of dollars for a quick car repair, you may find yourself reaching for that plastic lifeline.
However, using a credit card may come at a high price. Credit cards can carry high-interest rates that, if not paid off in a timely manner, can drive up the original cost of the car repair. If you can’t pay off your credit card right away, you may end up spending much more for your repairs by the time you make your final payment.
5. Considering a Personal Loan
One good option for how to pay for car repairs when you have no cash on hand may be taking out a personal loan. Personal loans are sometimes overlooked as a way to come up with cash fast, but in the right circumstances, a personal loan can come in handy.
A personal loan may offer better interest rates or better loan terms, which might help you save money when facing unexpected car repairs.
A personal loan is an unsecured installment loan, which means that you borrow a set amount and pay it back in equal monthly installments over a fixed period. “Unsecured” means that the loan is not tied to any physical piece of property through a lien, but instead offered to borrowers based on factors like creditworthiness.
Using a personal loan instead of a credit card to pay for car repairs means that you may be able to borrow enough to cover the full cost of the repair upfront and then pay it off with a fixed payment option over a set period of months or years, potentially without the high costs involved when keeping a balance on your credit card.
Another benefit of using a personal loan to pay for car repairs is the relatively quick application process.
While you’ll need to meet certain qualifications set by your chosen lender in order to secure financing on a personal loan, the process is pretty straightforward, and some lenders disburse loan funds within a few days, which means you can pay for repairs quickly.
Depending on your situation, a personal loan might be the right option when it comes to helping you get back behind the wheel and onto the road.
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