Private Party Loans and How to Get the Best Rates

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Even with poor credit.

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Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


, - January 2, 2020

Private party car loans are offered to people through a direct lender when they need financing for a vehicle from an individual instead of a dealership. Private party loans are a form of direct lending that can be simple to apply for, but may require more qualifications with bad credit.

Getting a Private Party Auto Loan

Private party loans, also referred to as direct loans, are a good way to save yourself the hassle of haggling with a dealer over rates. There are several ways you can apply for a private party auto loan: online, at a bank, or through a credit union.

These application options are equally simple, but you may have a better chance of getting approved through a bank or credit union that you’re in good standing with if you have bad credit.

Like other types of car loans, bad credit borrowers typically have to meet a few requirements before they’re approved. When you meet these qualifications, it shows lenders that you have the ability, stability, and willingness to take on an auto loan.

The conditions vary by lender, but you typically have to provide proof of:

  • Your income – Most lenders have a minimum income requirement. While not universally standard, it's common to see bad credit lenders require a minimum income of $1,500 to $2,000 a month before taxes.
  • Your employment – Lenders typically require you to have steady employment of at least six months at your currentjob. A minimum three-year overall employment history, with no gaps over 30 days between jobs, is usually also required.
  • Your residence – Lenders need you to prove that you have a residence, and require a recent utility bill in your name at the address listed on the application as proof.

When you’re pre-approved for a private party loan, you’re able to go to any individual and purchase a vehicle, as long as it meets the lender’s guidelines and is within your loan amount. If you meet all the lending requirements and are approved for a private party loan, you receive a check which you can sign over to the seller to complete the sale.

Getting the Best Rates on Private Party Car Loans

In order to get the best rates on private party car loans, you might have to do some searching. Typically, the lowest rates are offered to people with the best credit. But what does that mean if you’re struggling with bad credit?

Bad credit borrowers generally see higher interest rates across the board when it comes to auto loans. If you have a bank or credit union where you’re a long-standing customer, it could go a long way toward helping you qualify for a better interest rate. If this doesn’t work for you, you can try rate shopping.

Rate shopping is the process of applying for the same type of loan with different lenders to see who can offer you the best rate. This process, done in a short time frame of around 14 days, allows you to preserve your credit score, as well.

When you rate shop, all hard credit inquiries made for the same type of credit count as one inquiry instead of several, which minimizes the impact on an already low credit score.

In order to ensure that you’re able to get the best rates possible for your situation, try these tips to make the most of your ability to qualify for a private party loan:

  • Know your credit situation – When you know your credit score and what’s on your credit reports, you can research the average interest rates for people in similar situations. Knowing this gives you the power to walk away from a lender that’s not playing ball when it comes to loan rates.
  • Improve your credit score before applying – If you can hold off on getting a vehicle right now, take some time to work on your credit score. The higher your credit score, the better the interest rates you’re likely to qualify for. One of the best ways to ensure your credit score stays healthy is to pay all your bills on time. This helps you build a solid payment history, which is the biggest factor that makes up your credit score. You can also improve your credit score by reducing credit card balances, becoming an authorized user on someone else’s credit account, or by getting a regular or secured credit card yourself and managing it responsibly.
  • Add a cosigner – By adding a cosigner to your car loan, you have the opportunity to "borrow" their good credit score, and possibly qualify for a lower interest rate. Being a cosigner is a big responsibility, so make sure anyone you ask not only has good credit, but is prepared for the potential consequences. If you can’t keep up with your loan payments, a cosigner has to take over or risk damage to their own credit score along with yours.

Get a Subprime Auto Loan Instead

If a private party loan isn’t in the cards for your credit situation right now, you may still be able to get a loan. Bad credit borrowers often have a better chance of getting approved for financing through a subprime lender. These lenders help people that are struggling with credit issues.

However, subprime lenders only work through special finance dealerships, and they can be difficult to tell apart from traditional dealers. That’s where CarsDirect comes in. We can help you find the right kind of dealership for the auto loan you’re searching for. Plus, a bad credit car loan is a great way to help improve your credit score so you can qualify for that private party auto loan you really want the next time around!

So, if you’re ready to find financing, simply fill out our free, no-obligation car loan request form, and we’ll get to work matching you with a local special finance dealer. Don’t wait any longer to get the loan you need, get the process started with us right now!

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Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


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