Getting a Private Party Auto Loan

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The CarsDirect editorial team is dedicated to providing our readers with the latest on new and used cars, expert opinions on which vehicles make the grade, and all the fun stuff in between.


, - May 26, 2016

Private party auto loans are interpersonal loans. They're usually available when purchasing a vehicle from a third party, such as a friend or a neighbor. Though these loans typically follow the same conditions as a normal short-term loan, there are some differences, primarily the absence of a dealer.

Thus, acquiring a loan with bad credit is a potential headache. Fret not; use this guide to help you in your quest.

Obtain Credit Report

The first step in applying for a blank check auto loan is to get a copy of your credit report. Those with credit scores of at least 620 should be able to get a private party auto loan without much trouble. For those with lower credit report scores, a great way to improve your chances of getting an auto loan is to pay a larger down payment.

Supplying Additional Information

In addition to knowing your credit score, you’ll also need to submit basic documentation of your income, residency, and employment history. Since car loans are paid back in monthly installments, lenders often require a certain minimum requirement in order to meet this obligation. You can prove your income with tax returns, pay stubs, and bank statements. Minimum income requirements vary, but start around $1,500 to $1,800 per month. Pay stubs may meet the employment history requirements. A letter from your employer will also satisfy this need. Many lenders require at least six months of employment preceding the loan. You can provide proof of residency by submitting a copy of your utility or phone bill, a copy of your driver’s license, or a copy of the rental contract. Lenders prefer borrowers who have maintained the same residence over at least a year long period.

Improve Your Score

In addition to following these basic steps, you can also improve your chances of securing an auto loan with bad credit by selecting the least expensive car that meets your needs. On-time payments will also help you improve your credit report rating. Once you’ve improved your credit rating, you can consider refinancing your auto loan and securing a lower interest rate. Private party auto loans are a great opportunity for those with a poor credit rating to get the car they need while also working on improving their overall credit rating.

Application for a Private Party Auto Loan

This loan counts as a used car loan, therefore most regular lenders offer them. The first step in this process is to find potential lenders and research them for their options and interest rates. An ideal combination would be low rates of interest with an extended period of time. Like a normal loan, the rates of interest in this loan are associated with your credit history, though they may be a bit higher than the normal dealership loan.

While a normal dealership loan has a payment period of 72 months, a private party auto loan has a period of 48 months. Since the interest rates can be as high as 2 percent above the normal, be sure to pay off the loan as soon as possible.

Down Payment

Since the period of the loan payoff for a private party loan is considerably lesser than a normal loan, it's recommended that you make a down payment of no less than 20 percent to avoid paying to the bank far more than what the vehicle is worth and to qualify for lower interest rates where available.

When Do You Get a Title?

For privately owned cars, there are sometimes two lenders operating on both sides—the buyer’s and the seller’s lender. If the owner of the car has taken a loan against the car already, the sale requires the seller’s lender to complete the procedures before completion. For complicated situations like this, it could take up to two weeks more than normal, which is typically one to two days.

It's important to know the procedures associated with buying a vehicle through a private party auto loan, since it's possible for you to get a good deal on the purchase.

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The CarsDirect editorial team is dedicated to providing our readers with the latest on new and used cars, expert opinions on which vehicles make the grade, and all the fun stuff in between.


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