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Private party auto loan: What it is and how to find one Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our aim is to assist you make smarter financial decisions by offering you interactive tools and financial calculators that provide original and objective content. We also allow users to conduct research and analyze information without cost, so that you can make financial choices with confidence. Bankrate has agreements with issuers, including but not restricted to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money The deals that are displayed on this website are provided by companies that compensate us. This compensation may impact how and when products are featured on this site, including for instance, the order in which they may appear within the listing categories in the event that they are not permitted by law. Our mortgage, home equity, or other home loan products. But this compensation does have no impact on the content we publish or the reviews that appear on this website. We do not contain the entire universe of businesses or financial offerings that could be accessible to you.



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5 min read published on October 13, 2022.
Writen by Rebecca Betterton Written by Auto Loans Reporter

Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in assisting readers in navigating the ins and outs of securely using loans to buy a car.







The edit was done by Rhys Subitch Edited by Auto loans editor

Rhys has been editing and writing for Bankrate since late 2021. They are passionate about helping readers gain confidence to control their finances by providing precise, well-researched and reliable facts that break down otherwise complex subjects into digestible pieces.









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Private party loans are often easier to obtain than traditional loans. However, lenders might charge higher since buying directly through an individual is thought to be more risky than purchasing from dealers. Despite the higher cost associated with private party auto loans however, there are ways to find lenders offering auto loans that you can afford. What is a private auto loan? A private party auto loan lets you finance a vehicle that is owned directly by its owner and not a dealer. A purchase from an individual typically will result in a lower cost for the vehicle. But because they carry greater risk for the lender, they're not as readily available than other auto loans -- and often they're accompanied by higher interest rates. "Because of the nature of private-party loans, rates can be higher than what you'd see if you went to an auto dealer," says Strati Papageorge the senior vice president of the auto product management division of PNC Bank. "But the price for customers is generally lower costs for the vehicle and they are able to get a low-cost payment." The good news is that there are methods to mitigate the drawbacks associated with private party auto loans and find the lender that will offer an auto loan that you can manage to pay for. What happens when you take out a private-party auto loan is a good idea Your budget as well as the local availability of used vehicles will be the biggest factors to consider. Fortunately, the actual procedure for financing is like shopping for a new or used car at a dealership. Set up a budget your budget, begin by looking at your credit score and history to get an idea of what and loan amounts you might qualify for. When you are aware of the condition of your credit score, it will be easier to , decide how much you can pay out of pocket and also determine the amount you'll have to finance. Find lenders to compare the type of vehicle you plan to purchase, for prospective lenders who offer private-party auto loans. Compare rates of interest, loan terms, monthly payments, fees and penalties. Since private-party loans tend to be more costly and require preapproval prior to you begin shopping. In this way, you'll have a clear idea of the amount you will pay and how much you'll be paying each month. Choose a vehicle Private sales are usually limited to inventory in the local area, so you should consider a variety of choices in mind when looking for a used car. Check the cost-to-own estimates from trusted sources like Edmunds or Kelley Blue Book. These can help guide you toward a reliable car. It's possible to access a nationwide website to locate the perfect vehicle, but taking a test drive and purchase -- and dealing with transfer of title outside of the state can be more trouble than the car is worth. When you're ready to purchase privately check out your state's laws regarding title transfers. The laws should be accessible on the state's Department of Motor Vehicles' website. Close the deal after you find a vehicle and have signed the loan agreement and your lender will issue the check to you or directly to the seller. If either you or the seller opt for direct deposit, be sure the seller knows that transferring funds can take a few days. Your lender will send you the dates of payment due and an information sheet that explains the amount of money that will be allocated to interest and principal every month. If you're able to, opt to pay by autopay. This is a great way to ensure that you are paid on time without writing checks or constantly checking in to an online portal. Be sure to verify that payments have gone through each month. Where to find private party auto loans The majority of major financial institutions -- like community banks local credit unions, local credit unions and online lenders provide private party auto loans.The car must satisfy certain requirements. For instance, lenders typically require that the vehicle not be older than 10 years with less than 100,000 miles. Other lenders might require an upper limit on the loan amount. If the car you'd like is $6,000, but the lender does not offer loans that small then you'll need look for a different lender. Carefully review the lender's criteria before applying for a private auto loan to ensure that you don't take a hit to your credit for a loan you don't qualify for. How to apply for a private-party auto loan After you find the car you wish to purchase from a private owner, make sure you supply a lender with your basic personal information that include: your full name and birth date along with your address, Social Security number and contact information. Employment and income information. Current financial obligations, including mortgages. It is also necessary to have specific documents and details about the vehicle you want to buy, including: Make and model, model year, mileage and year of manufacture. The VIN, or vehicle identification number. or VIN. Bill of sale that outlines the purchase contract. Copy of the registration of the vehicle. Copy of the title of the vehicle. A signed payoff statement of the vendor's lender, if applicable. If your credit isn't as good it's best to hold off the purchase until you've got . Waiting a few months won't transform your credit from poor to perfect but it can make enough of a difference to earn you some savings on interest rates and monthly payments. Four reasons to think about a private party loan Although private-party auto loans can have higher rates than conventional auto loans however, there are advantages to not having to go through a dealership. There are better vehicle deals The prices for sale at private sales tend to be less expensive than they are at auto dealerships. When you get a private party auto loan you have the advantages of financing the same way you would in a dealership as well as the savings a private sale is likely to offer. It could be less expensive than an individual loan: A is likely to be more expensive since it's not secured. A lender assumes more risk when there is no collateral to secure the loan in the event of a default by the borrower. They are flexible instead of being restricted to what a dealership offers and offers, you can purchase the vehicle you want at a cost you can pay for it from a private seller. There are loan options for people with bad credit: Even those who have poor credit might be eligible for private auto loans. However, like the majority of loans for borrowers with bad credit, they come with higher rate of interest and monthly payment as well as a higher overall cost. Alternatives to private automobile loans If you didn't be approved or couldn't locate a private party auto loan that is compatible with the vehicle you're looking to purchase You have other options that you can pursue to buy by selling it to a private dealer. Compare personal loans The most suitable alternative to a private-party auto loan would be an . For non-secured personal loans they are unsecured. The lender examines your income and credit score to determine loan eligibility. The vehicle won't influence the decision to approve. This could be an excellent option in the event that the car you're considering buying is too old or has far too many miles. The vehicle is being bought using an salvage title. Minimum loan amount is greater than you want to take out. Although the personal loan may give you the opportunity to buy the vehicle you're looking for however, it is likely to carry a higher interest rate than a private-party auto loan and could end up costing you more in the end. Go to a dealership. Dealers might have more expensive prices than private sellers, however it's much more straightforward to get an loan. If you've been rejected for private auto loan check to see if you can qualify for financing on the premises offered from the dealership. You could also be eligible for a used auto loan from an existing lender that previously rejected you for a private loan. Save money if you're not in a hurry or haven't found the right private sale yet saving. The more you are able to put toward a car, the less money you'll spend overall. And if you are looking at older, cheaper models that aren't eligible for a traditional loan, you won't need to take on more risk by financing your car through an individual loan. The bottom line Private automobile loans are a quick, fairly painless way to buy outside of the high-pressure environment of a dealer. They're not as popular, but you will still be able find competitive options from a variety of lenders. Since the costs for private purchases are lower than the prices at a dealership it is possible to save money.


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Written by Auto Loans Reporter

Rebecca Betterton is the auto loans reporter for Bankrate. She is a specialist in helping readers to navigate the details of borrowing money to purchase the car they want.



Edited by Rhys Subitch Edited by Auto loans editor

Rhys has been writing and editing for Bankrate since the end of 2021. They are committed to helping readers gain confidence to control their finances with clear, well-researched information that breaks down otherwise complex topics into digestible chunks.






Auto loans editor




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