You’re running late to work. Your boss understands, but it’s embarrassing. You pride yourself on being a professional, and hate the thought that your team is falling behind because you’re not there to help. Frustrated and distracted, you merge into the left lane. And the world is suddenly upside down.
The shock passes, and you realize you’re alright. Stepping out, you find that the driver in the other car is fine, just a slight bump. You can’t say the same for his car though. You look at your own car and you realize that it’ll be weeks in the shop before it can run again, if ever. And you have no idea how you’re going to pay for it.
This is an all too common scenario in America. Even if your car doesn’t get totalled, and I hope it never does, sooner or later, the chances are you’re going to be in an accident, or your car is going to break down. According to Forbes, more than 2 million people in America are injured in automobile accidents every year, and every 17.9 years, each person will likely be involved in an accident of some kind.
When you have to deal with unexpected car repairs, it can create a world of headaches for you. You’ll have to get it fixed, and arrange some other form of transportation to travel, and come to grips with the fact that your car’s resale value just dropped substantially.
While there’s nothing I can say or suggest that will completely save you from the frustration of dealing with unforeseen car troubles, the following are three options you can consider to help you pay for your damages and help you get back on the road faster, and with less debt.
Use Your Insurance
When your car breaks down, your default option is most likely to file a claim with your insurance provider; that’s what it’s there for afterall. Most Americans do, and 99% of the time, it covers everything they need to recover successfully from an accident or breakdown. However, before you decide to default to your insurance to cover your costs, consider the following points:
- Your Coverage – Depending on what coverage you have, your insurance may not pay for all the expenses you’ve incurred. For example: Bodily Injury Liability and Property Damage Liability are required by almost almost all states in the U.S., but options like Collision and Comprehensive coverage are optional. Depending the circumstances of your incident, your policy may not cover every expense.
- Increased Premiums – Your premium is just another word for the your insurance bill. If you’re in an accident, and you’re at fault, more than likely, your insurance provider is going to raise your premium if you file a claim. Insurers tend to do this because, in these instances, you’ve demonstrated that you’re an increased-risk driver, and there’s no guarantee you won’t continue this trend of causing accidents.
- Compiling Debt – Tying in with the first bullet point, if your insurance doesn’t cover every aspect of your wreck, you may find yourself obligated for expenses you can’t afford, which can have severe consequences. Let me be clear: being in a wreck will not drop your credit score. However, accumulating debt you can’t afford, and missing your monthly payments, will drop your score.
If your insurance coverage will take care of all of your costs, that’s great, and you should probably use it. However, if your insurance won’t cover all of your debts, and you can’t afford to let your credit score drop any further because of missed payments, you should consider other options.
Take Out a Loan
One option you should definitely consider to help pay for your car troubles is to take out a loan to pay the body shop. While you’re probably still reeling from your car breaking down or getting wrecked, and don’t even want to think about owing someone money right now, a loan will offer you options that will help make your circumstances easier to bear, and can even help you in the long run. Consider the following benefits that a loan can offer you:
- Flexibility – A loan will allow you the flexibility to pay off your car repairs over time. Most body shops and dealerships require you to pay for services in full upon completion. With a loan, you can stretch your payments out over three to five years, or however long your lender is willing to negotiate with you. This will allow you to make smaller, more affordable payments, rather than dealing with a fat lump sum.
- Debt Consolidation – A loan will give you the ability to consolidate your debts. If you know for sure you’re going to need a loan to cover your repairs costs, you should consider consolidating any other debts you have, such as credit card debts or an outstanding car loan, and pay them off with a personal loan. This means you only have to deal with one lender, with one interest rate and one monthly payment, instead of juggling multiple agencies.
- Improve Your Credit Score – Though I doubt your credit score is at the top of your concerns list after your car breaks down, and I can’t say I blame you, the fact is that taking out a loan could help you improve your credit score. When you’re approved for a new loan, your available credit limit goes up, you’ve diversified your credit portfolio, and so long as you make your minimum payments every month, you can strengthen your credit history.
Use Your Car’s Warranty
Using your car’s new or extended warranty is another option you can consider if you need to make repairs. If your breakdown was due to a fault with the car itself, and not anything you’ve done, this is especially true, because you won’t owe any money or very little. However, warranties are the most restrictive option of the three suggestions here, and you need to verify the following before you decide to utilize the warranty as your primary payment source:
- Warranty Conditions – Warranty conditions outline very specific criteria for what your warranty will cover, and how. Factors such as what your warranty will cover, whether or not you’ve followed your car’s recommended service schedule, and if your warranty has expired.
- When to Pay – Some warranties will reimburse the body shop or dealership directly, and you never have to do a thing. However, other warranties specify that you must pay the costs in full, and then submit the receipt, along with other supporting documentation, to receive your reimbursement. If you’re strapped for cash when you break down, this can leave you in a tight spot.
If your warranty will cover damages to your car, you’re in a great spot, since you’ll be saving so much money. However, there’s a lot of boxes that need to be checked before your warranty will kick in, so understand your warranty before you even buy a car, so you’re not taken by surprise a second time after your car breaks down.
On the Road Again
It can be hard to stay positive after your car breaks down, but it’s essential. Staying calm, and looking at your car trouble as an opportunity to improve your financial situation, will help you not only bear your circumstances better, it will keep negativity from spreading to other areas of your life. Keep in mind the three options we’ve discussed here, and weigh them carefully to determine which is best for you. Drive safely!