How to apply for a car repair loan: A comprehensive FAQ

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Everyone knows that car repairs are a part of car ownership. That doesn’t make paying for them any easier, especially when they’re unexpected. Whether you need $400 for a new alternator or $4,000 to replace your entire transmission, you need a way to get back on the road quickly and safely.

Being without your car to go to work, take your kids to school or run your one-man business isn’t an option. But did you know that a car repair loan might be? And a financially savvy one at that. Learn what car repair loans are and how to find out if there’s one that’s right for you.

What is a car repair loan?

Is an online car repair loan safe?

Will applying for a car repair loan hurt my credit score?

What steps should I take before applying for a car repair loan?

How does applying for a car repair loan work?

What common loan terms should I know?

What should I do after I’m approved for a car repair loan?

What happens if I’m not approved for a car repair loan?


What is a car repair loan?

A car repair loan can give you the opportunity to finance car repairs like you do other expenses and then pay back the money in easy-to-digest monthly installments.

There are many ways to pay for unexpected repairs, but some are designed to take advantage of people when they need help the most. For example, commonly advertised payday loans promise “fast money,” but they can trap a borrower in a cycle of ever-increasing debt with extraordinarily high interest rates and fees. Vehicle title loans can result in a car being seized by the lender if loan terms aren’t met.

A fair car repair loan from a lender that has its borrowers’ best interest in mind can be a better way to get the breathing room you need. Learn more about paying for car repairs with a car repair loan.

Of course, not all car repair loans and lenders are the same. Lenders offer different terms, fees and rates, and have different eligibility requirements, application processes, loan amount ranges and levels of customer service. It’s important to vet lenders very carefully before you decide to apply for a car repair loan or to get a referral from a trusted source, like your preferred auto repair shop and/or dealership.

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There are many ways to pay for unexpected repairs, but some are designed to take advantage of people when they need help the most.


Is an online car repair loan safe?

Ease and speed of application is an important factor that can set one lender apart from another. Online, paperless auto repair loans are quicker than credit card applications and far more convenient than visiting a bank or credit union. Look for an online lender that respects your valuable time with an application that takes only minutes to fill out — and a decision that comes in seconds instead of hours or even days.

Sounds great? It definitely can be. But before you start providing personal information online, like your phone number and email, you should make sure that the lender is reputable and its website is secure.

Your Auto Repair Loan Checklist

There are also things you as a consumer can do to make applying online for a car repair loan that much safer. Here’s what you need to do before choosing an auto repair loan lender.

1. Confirm the padlock.

If a lender has a secure server, you’ll see a padlock icon in front of its website address, or URL, in your internet browser. That means the data connection between your browser and the website is encrypted. The URL should also start with “https” instead of “http.” The “s” means the website is secure. If you get a notice that the site’s security certificate has expired, don’t continue.

2. Read the privacy policy and disclosure notices.

First, if the website doesn’t have these notices, that’s a red flag as they’re required by law. Second, don’t skip reading them. These notices provide information on how a lender plans to use your personal information and how they protect it. Also, make sure the lender is FDIC-insured.

3. Read auto lender reviews.

Spend time researching the lender’s reviews. Search the Better Business Bureau, Google, Yelp, Facebook and other sites to see what customers and, if relevant, auto repair shop and/or dealership partners are saying about the lender and the loans. If a company has very few reviews, be wary. It can mean the lender hasn’t been in existence long, is not being transparent, or, worse, is a phony business looking to scam you.

4. Create a new password.

Never use the same password for your loan application that you do for other online activities. In addition, follow recommendations that can make your password more secure, such as using a combination of eight or more uppercase and lowercase letters, symbols and numbers.

5. Look for contact information.

Multiple ways to contact a lender — by phone, email, text or online chat — should readily be provided on the website.  

6. Consider using the financing partner of your trusted auto repair shop and/or dealership.

Many reputable auto service centers partner with online lenders they trust so they can offer their customers a way to get fair, fast financing. The benefit is that they’ve done the vetting for you and you can apply for a loan without ever leaving the service center. That doesn’t mean you shouldn’t ask questions or ask for detailed information.

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Online, paperless auto repair loans are quicker than credit card applications and far more convenient than visiting a bank or credit union.


Read our customer reviews

Find out why customer tryst their auto loans with DigniFi.


Will applying for a car repair loan hurt my credit score?

There are three credit bureaus in the United States that track your credit history and give you a credit score. When you apply for a loan, a lender will generally look at your credit reports at all 3 bureaus as part of its approval process. The information in those reports helps the lender decide whether or not to offer you a loan and at what terms.

When you give permission for a lender to check your credit through its application process, this is known as a “hard inquiry” or a “hard pull.” Hard inquires are noted on your credit report, which may or may not lower your score by a few points. However, applying for several loans, particularly in a short time frame, can cause a larger impact and be seen as a red flag by lenders. Generally, hard inquires fall off of your credit record report after two years.

But some lenders of car repair loans now provide a pre-approval option that’s known as a “soft inquiry” or “soft pull.” Soft inquires will not change your credit scores even if a credit bureau includes them in your credit report.

Soft inquiries are a less in-depth review of your credit files. Some lenders use the information given in a soft inquiry, along with any other parameters they use to make financing approval decisions, to let you know you’ve been approved and provide an estimate of your terms. If you choose to proceed with the loan, a hard inquiry will occur before your terms are locked down.

Looking for a lender that provides a pre-approval option is a great way to find out what your options are without hurting your credit. Lenders who offer it often note “will not affect your credit score” near the application’s “submit” button.

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What steps should I take before applying for a car repair loan?

Before you begin applying for a car repair loan, there are some simple steps you should take to make sure that you get a loan that’s right for you:

1. Check your credit score.

If you check your credit score yourself, it’s a “soft pull” that won’t affect your reports. Knowing what your credit scores are can help you understand if you’re likely to qualify for a loan and with what type of terms. It also allows you to look for any errors in the report that you want rectify before applying for a loan. You don’t need to pay to see your credit history. Websites like Credit Karma let you do it for free.

2. Research lenders and their auto loan offerings.

In addition to making sure that a lender’s website is technically safe, some things you should look for as you compare car repair loans and lenders include:

  • A quick and easy application process, including a pre-approval opportunity

  • Instant decision

  • Affordable payments

  • Flexible payment options

  • Friendly customer service

  • Low interest rates

  • Interest-waived offers

  • Positive customer reviews

  • Proof of accreditation

3. Decide how much money you need to finance your car repair

Whether you know the cost of your car’s needed repairs or are anticipating them, figure out how much of it you want to finance. Remember, a lender may not offer you all the financing you need to cover the cost of the repairs, in which case you’ll need to work out the remaining balance with your auto repair shop and/or dealership.

4. Figure out your ideal monthly payments

If you’re working with a lender that provides flexible terms, you should be able to choose the length of your loan. The longer the length of your loan, the smaller the monthly payments. Figure out what you feel like you can manage each month before you apply, so you don’t agree to terms that don’t work well for you.

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How does applying for a car repair loan work?

If the lender is doing it right, the application should be quick, easy and paperless. For example, DigniFi’s online car repair loan process takes only four steps that can be done in two minutes from an internet-connected device. All you have to do is:

1. Enter basic information.

This includes your name, your phone number, your email, your household’s monthly income and the last 4 digits of your social security number. You shouldn’t be asked for in-depth information that requires you to pull out paperwork or personal data that isn’t used to make loan decisions.

2. Verify your identity.

Reputable lenders put safeguards in place to confirm that the person applying for a loan is indeed that person and not someone committing fraud with your information. For example, DigniFi sends a verification code to your cell phone that you have to type into the loan application.

3. Provide information about car repairs, if applicable.

If you know what repairs you need or what auto repair shop and/or dealership is providing them, you’ll fill in that information.

4. Submit the application.

A DigniFi decision comes back within seconds.

Online car repair application processes vary. Make sure the lender you choose is transparent about the steps you need to take and the information you need to provide.

If you choose to apply for a personal loan at a bank to cover car repairs, call ahead to find out what information, paperwork and identification you need to bring with you (generally, more information is required than with an online loan) and how long it will take before you hear back from them on a decision.


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What common loan terms should I know?

As you research a car repair loan and read through the application process and loan documents, you may come across common financing-related terms such as:

  • Credit history - A record containing information about you, including your payment history on previous debts.

  • Annual percentage rate (APR) - The cost of your credit as a yearly interest rate. It’s intended to provide a single value for a consumer to compare the cost of credit between one lender and another.

  • Interest - The cost of borrowing money, generally a percentage of the amount owed.

  • Accrued interest - The interest that accumulates and is payable on the unpaid principal balance of a loan.

  • Principal balance - The amount of the loan remaining unpaid, not including interest and other charges.

  • Finance charge - The dollar amount the credit will cost you. Finance charges include interest and may also include transaction fees and service fees.

Any time you come across an unfamiliar term, make sure you look it up or ask the lender you’re considering to explain it to you. A loan is a binding contract, so it’s important that you fully understand every aspect of the transaction.

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What should I do after I’m approved for a car repair loan?

Congratulations! You’ve been approved for a car repair loan! Once you receive your approval, you have to fill out loan documents that solidify the terms and conditions of the loans, such as:

  • How much money you’re borrowing

  • The amount of time you have to pay back the loan

  • Your monthly payments

  • The APR

  • Fees, such as the loan origination charge

  • Whether or not there’s a pre-payment penalty

  • Costs of any extra services you chose, such as roadside assistance programs or vehicle service contracts

  • How you’re going to make payments (consider the electronic ACH option so you don’t have to remember to mail in monthly payments)

Read the fine print. If you don’t understand something in the contract, contact the lender. Be sure to keep a print or digital copy of your contract in a safe place and that you know how to make your payments and when they’re due. A lender should offer you multiple ways to make payments, such as with a check, through bank payments, with a debit card, with services like PayNearMe and more.

If you’re working with your auto shop and/or dealership’s lending partner, they’ll be notified immediately that you’ve been approved and repairs can start.

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What Happens if I’m Not Approved for a Car Repair Loan?

If a lender denies your application for a loan, they’re required by law to let you know why through what’s called an “adverse action” notice. The notice will be sent to you within seven to 10 days after you received the decision.

Adverse actions are reported to the credit bureaus, which can impact your credit score. That’s why it’s important to make sure, by checking your credit score before applying for a loan, that you have a reasonable chance of being approved.

Some lenders who decline your application may refer you to a partner lender that approves a wider range of applicants. Reputable lenders typically only work with other reputable lenders, but you should still do your due diligence.

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Some lenders who decline your application may refer you to a partner lender that approves a wider range of applicants.


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