Finder is committed to editorial independence. While we receive compensation when you click links to partners, they do not influence our content.

Compare private party auto loans

You might save on the sticker price, but is it worth the higher rates?

Getting a loan for a car you want to buy from a friend, relative or other private seller works a little differently than when you get financing through a dealership. While you might get a better deal on the price of the car, private party auto loans tend to come with higher rates or require stronger personal credit. It can also take longer, since you’ll have to transfer the title of the vehicle yourself.

Compare loans to buy a car from a private seller

Name Product Interest Rate Loan Amount Loan Term Requirements Credit Score Link
Loans Canada Personal Loan
Secured from 2.00%, Unsecured from 8.00% to 46.96%
$300 - $50,000
3 - 60 months
No min. income or employment requirements
Min. credit score: 300
Go to site
More Info
An online broker with the largest lender network in Canada. Get matched for free with lenders offering both unsecured and secured loans through one quick application regardless of your financial situation.
Spring Financial Personal Loan
17.99% - 46.96%
$500 - $15,000
9 - 48 months
Min. income of $1,800 /month, 3+ months employed
Min. credit score: 400
Go to site
More Info
An online lender offering unsecured personal loans and credit builder loans. Those filing for bankruptcy or a consumer proposal can also apply. If you're not eligible for an unsecured loan, you may be offered a loan to help rebuild your credit.
goPeer Personal Loan
8.00% - 33.92%
$1,000 - $25,000
36 - 60 months
Recommended income of $40,000 /year
Min. credit score: 600
Go to site
More Info
Canada's first regulated consumer peer-to-peer lending platform offering unsecured loans. Connects creditworthy Canadians looking for a loan with Canadians looking to invest. goPeer strives to offer the most competitive interest rates. Apply in minutes and get a response within 24 hours.
OFFER
Mogo Personal Loan
9.90% - 46.96%
$200 - $35,000
6 - 60 months
Min. income of $13,000 /year
Min. credit score: 500


Mogo offers a 100-day money-back guarantee. If you're not happy with your loan, pay back the principal and get your 100 days of paid interest and fees back.
Go to site
More Info
An online lender who aims for a hassle-free process through same-day unsecured loan approval and funding. Get a loan fast and track your credit score for free.
ConsumerCapital Personal Loan
19.99% - 34.99%
$1,500 - $12,500
24 - 60 months
Min. income of $1,900 /month, 6+ months employed
Min. credit score: 600
Go to site
More Info
An online lender that provides fast unsecured personal loans. Complete an application in less than 10 minutes and get a decision within 24 hours. For faster loan approval, complete the Flinks bank integration in the app.
SkyCap Financial Personal Loan
12.99% - 39.99%
$500 - $10,000
9 - 36 months
Min. income of $1,200 /month, stable employment
Min. credit score: 550
Go to site
More Info
An online lender offering unsecured personal loans to borrowers with a wide range of credit scores. Apply in less than 5 minutes and if approved, receive financing in as little as 24 hours.
LoanConnect Personal Loan
Secured from 1.90%, Unsecured from 5.75%-46.96%
$500 - $50,000
3 - 120 months
Currents debts must total less than 60% of income
Min. credit score: 300
Go to site
More Info
An online broker who helps inform clients towards better finances. Get pre-approved by different lenders for unsecured or secured loans in 5 minutes with any credit score.
Fairstone Unsecured Personal Loan
26.99% - 39.99%
$500 - $25,000
6 - 60 months
Able to make monthly repayments on your loan
Min. credit score: 560
Go to site
More Info
An online lender with a team dedicated to professional service. Get a quote for an unsecured loan without impacting your credit score. Receive funds within as little as 24 hours. No prepayment fees.
SECURED
Fairstone Secured Personal Loan
19.99% - 23.99%
$5,000 - $50,000
60 - 120 months
Must be a homeowner
Min. credit score: 560
Go to site
More Info
Use your home equity to get a secured loan up to $50,000 with flexible repayment options and a long loan term. Get a quote without impacting your credit score.
Loan Away Personal Loan
19.90% - 45.90%
$1,000 - $5,000
6 - 36 months
No min. income or employment requirements
Min. credit score: 300
Go to site
More Info
A lender that approves unsecured loans in as little as 20 minutes. Get affordable monthly repayments with any credit score.
loading

Compare up to 4 providers

Name Product Loan Amount Interest Rate Loan Term Min. Credit Score Requirements Table description
Coast Capital Car Loan
$10,000 - No Max.
Varies
18 - 84 months
650
Able to service debt payment of $300/month
Competitive rates and flexible terms.
Finance new and used vehicles from one of Canada's largest credit unions. No credit union membership required. Available across Canada except SK, QC, NT, NU, YT.
loading

Compare up to 4 providers

Top pick for private party car loan: Coast Capital

Key features: Coast Capital is a reputable credit union who can help you through the whole private sale process without compromising on the make, model and condition of the car. It will also help you with the paperwork, such as accident and damage history or any money that the car still owes.

How to apply: Apply online in as little as 10 minutes and get a response on the same business day. A team member will contact you and discuss your application, including required documents, rates and terms.

Eligibility requirements: Able to service debt payment of $300/month, minimum credit score of 650.

Go to site

What is a private party auto loan?

A private party auto loan is a type of loan you can use to buy a car from an individual, rather than a dealership. Since lenders consider it a riskier purchase, these loans often come with higher rates. It can also take longer because you have to transfer the title yourself — though you’ll likely save on the fees a dealership would charge for this service. If you’re buying a car with a loan the current owner hasn’t fully paid off, that can also take some extra time.

Where can I get a private party auto loan?

If you’re looking for a private party auto loan, you have a handful of options to choose from, including securing a loan from a bank, credit union or online lender.

Generally, you need to have an idea of the car you want to buy before you apply. Once you know how much you’ll need to borrow, compare lenders to find the most competitive deal you’re eligible for. After you apply and get approved, the lender sends the funds either directly to you or to your seller and you can begin the process of transferring the title. Keep in mind, repayment starts as soon as the loan is issued.

Here’s a closer look at each of your options:

Online lenders

Whether you need cash for a private party car loan, home repairs or to pay off debts, online lenders are a great option to help you secure financing quickly and efficiently.

Online lenders have a quick and convenient application process, in which you can simply apply online on your phone or desktop and you’ll usually receive approval and funding within a business day if all of your financial ducks are in a row.

If you’re choosing this route, you’ll need to have a solid idea of how much you need to borrow. Make sure you have a stable source of income and that your credit score and debt ratio are in good shape too. This combination will help you secure a lower interest rate. Always do some comparison shopping between online lenders to secure the best deal for your needs. Compare personal loans by online lenders.

Banks

Banks are the most traditional route to source a private party car loan. The process is identical to applying for a personal loan for other financial needs, except in this case you’ll be using your funds to pay for your auto purchase.

Bank loans are typically available only to those with good credit, so if your credit score isn’t in great shape, you may not qualify via this route.

If your credit score is in tip-top shape and you’re in good standing with the bank, you can score a competitively low interest rate, especially if you’re willing to secure your loan with your car. Across the board, banks will likely offer you the lowest interest rates for a private party car loan.

Term lengths are identical to online loans, varying from between 1 to 7 years.

You can also check in with your bank to see if a line of credit can cover the cost of your car purchase.

Credit unions

If you’re already a member of a credit union, it’s worth your while to check out the rates on offer for a personal loan to cover your car purchase. Credit union car loans also come with highly competitive rates and their own slate of benefits, organized by the credit union, including flexibility on your loan repayments.

If you aren’t a member of a credit union, you’ll have to apply for membership first, which may slow down your loan process.

New credit cards

While this is an unconventional option, you may be able to pay for your private car purchase with a credit card, especially if it comes with a 0% interest promotional period. Try to pay as much off as possible before that period is over to avoid those high credit card APRs. If your credit card has incredibly steep interest rates, you’re better off shopping for another loan with better terms.

Secured loans vs unsecured loans

Lenders have different types of loans that they offer, specifically secured loans and unsecured loans. Here’s how they differ:

  • Secured loans. Secured loans involve some sort of collateral to secure your loan, but by providing this insurance, you’ll secure a lower interest rate on your private party car loan. So what would you be putting up as collateral? The most obvious assets would be home equity, if you’re a homeowner, or the car you are buying. That means if you default on your loan or can’t keep up with repayments, your lender has the right to repossess the asset you’ve put up as collateral. Learn more about secured loans.
  • Unsecured loans. Unsecured loans come with higher interest rates because they don’t require any form of collateral. If your private car purchase isn’t too expensive and you have decent credit, this may be the route you’ll take for your loan. If you fail to repay this loan, your credit score will take a beating but your lender can’t repossess your car or any other assets. Unsecured loans are commonplace for online lenders – the application and approval process is usually pretty fast, which means you could secure a loan within the same day of applying. Learn more about unsecured loans.

Pros and cons of private seller auto loans

Though you can often nab a lower sticker price by buying a used car through a private seller, you may get stuck with financing that offers less-competitive rates and terms on your loan than a dealership would offer.

Pros

  • Potentially less expensive overall. The savings in private party financing comes in the loan amount, rather than interest. Private party sellers often offer cars at a lower price than dealers.
  • More room to negotiate. Private sellers typically aren’t excellent negotiators. And if they just want to get the car out of their hands, they might sell it for lower than the asking price.
  • No sneaky add-ons. Dealerships sometimes upsell you with add-ons you don’t need to inflate the price of your car. This rarely happens with a private party purchase.

Con

  • Higher rates. These types of loans tend to come with higher interest rates than car loans used to buy a vehicle from a dealership.
  • Shorter terms. Lenders also might give you less time to pay back a private party auto loan, resulting in higher monthly repayments. Dealerships can sometimes afford to be more flexible in the length of the loan terms offered to you.
  • More paperwork. You have to handle the bill of sale, title and registration transfer and any other paperwork that a dealership might normally handle for you.
  • Less protections. You typically won’t get a warranty when you buy a car outside the dealership. There may be some of the original manufacturer’s warranty left on the vehicle, but this coverage may be limited and when it runs out, you’ll be left to handle all maintenance expenses on your own.

Am I eligible for a private seller auto loan?

Each lender has different eligibility requirements, though you typically must:

  • Have strong credit.
    Since lenders consider private party auto loans more of a risk, you typically need strong credit to qualify for a competitive deal. A good credit score is at least 660 and will likely earn you a favourable interest rate. It may be possible to get a loan with a lower score, but your interest rate may be higher and you may have to provide more documentation to show that you can pay back the loan. In some cases, a cosigner may even be required.
  • Have a car picked out.
    You can only apply for a private party auto loan after you know exactly what you’re going to buy.
  • Meet age and mileage requirements.
    Many lenders have restrictions on the age and mileage of the car you’re looking to purchase. Typically, the older the car, the more expensive the loan.
  • Be a Canadian citizen or a permanent resident.
    It can be very difficult to find a private party car loan if you don’t have citizenship or permanent residency status. Instead, you might want to consider getting a personal loan for nonresidents.
  • Be at least 19 years old.
    In Canada, you need to be at least 19 years old to take out any type of loan. This is because minors are protected by law so that they cannot be sued if they don’t live up to their obligations or if change their mind about a sale. Therefore, banks and other lenders have very little protection if a minor fails to hold up his/her end of a deal. So if you’re under 19, you’re only legally allowed to enter into certain types of agreements.

What documents will I need to provide?

While each lender has its own set of eligibility requirements and application process, there are some overlapping themes. Here’s a look at the key documents you’ll be asked to provide as you go through the loan application process:

  • Proof that you’re of the legal age in your province or territory.
  • Proof of your employment status and monthly income (via pay stubs or bank statements).
  • A valid Canadian identification card to confirm your identity, your address and phone number.
  • An active Canadian bank account with direct deposit capability.
  • Your credit report with your credit score.

WHAT IF THE SELLER STILL OWES A PAYMENT ON THE CAR?

Sometimes a seller is offloading their vehicle before they’re done making payments on the car. If this is the case in your situation, it is possible for you to become responsible for loans left on a vehicle, even if the loans were taken out by another party.

In a nutshell, the seller may have financed the car with the vehicle acting as collateral on their loan. This means that the lender has the first rights to the car until the remainder of the loan is paid off. It doesn’t matter who owns the car at any given point in time.

Someone has to pay off the seller’s loan, and it could be you unless you ensure that the seller settles the debt before transferring the vehicle to you.

Your job is to make sure you’re clear on whether there are any outstanding debts remaining on the loan and who is responsible for the remainder of the loan. If the seller hasn’t completely paid off the car loan, they might use the money from the sale to do so and then transfer the title to you. In some cases, the seller might be able to pay off the loan with their own funds up front. But if they can’t, your lender might need to work with the seller’s lender to make sure the first loan on the car is paid off before the second comes into effect.

A great way to check if there are any claims to the title of a car is to get a vehicle history report from a company like CARFAX or AutoCheck. This will further show you the vehicle’s maintenance and accident history, which can help you determine if you’re getting a fair price.

Read our guide to selling a used car with an outstanding loan to learn more about how you as a buyer can work with sellers to handle sales involving existing car loans.

Can I get a private seller auto loan with bad credit?

Because lenders often consider buying a car from a private seller riskier than going through a dealership, finding a private party auto loan with bad credit can be tricky. It poses a double risk to lenders because of both the buyer’s questionable credit history and the seller’s unknown reputation.

You might have better luck securing a private party auto loan with bad credit using an online connection service. Make sure you’re not working with one that specializes in dealership financing or it may be harder to get a decent comparison on private lending options.

You should also try to save as much as you can for a down payment, since this will lower the amount that you need to borrow to buy your car and it’s typically easier to get approved for smaller loan amounts. Typical down payments run from 10% – 20% of a vehicle’s purchase price, so try to aim for higher than that amount. As with other bad-credit loans though, you’ll still probably end up with a higher interest rate.

Another option is to get an unsecured personal loan instead. There are online lenders who can work with borrowers with bad credit (but expect to encounter a higher interest rate).

5 steps to get a private party auto loan

Convinced buying a car from a private seller is right for you? Follow these steps to secure financing:

  1. Find your car. You need to know what car you’re going to buy before you apply for a loan. Have details on hand such as the make, model, year, mileage (if the car is used), price and dealership information.
  2. Shop around for a loan. Start by finding a lender you’re eligible to borrow from before comparing APRs (Annual Percentage Rates), terms and fees. Some lenders offer pre-approval, which allows you to compare the rates and terms you qualify for before filling out the full application.
    This can help seal a deal with a seller because of the confidence he/she has that your financing is in place. You may even be able to use pre-approval amounts as a negotiation tool.
  3. Apply for financing. Most lenders have an online application, though banks and credit unions might require an in-person visit. With an online lender, you could have funds sent to the seller in as fast as one day, while banks typically take at least a week to process the application.
  4. Fill out the paperwork. At this point, the seller has to sign the title over to you and complete the bill of sale. You can typically drive away in your car as long as the title is transferred over to your name.
  5. Register the title transfer and your car. Once you’ve signed the paperwork, you’ll have to visit your provincial licensing office to register the title transfer and your new car. You’ll have to pay a fee depending on where you live and will likely have to fill out more paperwork. You can often register your car online, though some provinces may require you to report to a physical location to register the title.

6 tips for buying a used car from a private seller

Keep these pointers in mind when buying a used car from a private party:

  • Check the vehicle’s history. Run a check on the vehicle identification number (VIN) to make sure the car isn’t stolen and hasn’t been salvaged.
  • Verify the seller’s identity. Ask to see the seller’s provincial ID to make sure you’re buying a vehicle from the person on the car’s title.
  • Have your mechanic look at it. Mechanics tend to favor the person they’re working with — you might get a more honest assessment if you use someone you’ve worked with before, rather than the seller’s.
  • Give it a spin. Test driving your vehicle is the only way to tell if it’s right for you and can help you spot potential problems.
  • See the title before you buy. It’s a red flag if the seller can’t produce the title up front or won’t show you it before you sign the bill of sale.
  • Double-check all sale and registration paperwork. Nobody likes delays due to incomplete or sloppy paperwork.

Bottom line

Getting a loan for a private party vehicle can be more expensive and take more time than financing a car from a dealership. But the potential savings on the actual price of the car might just make it worth it.

Learn about other car financing options by reading our car loans guide.

Frequently asked questions

Pictures: Getty Images

More guides on Finder

Go to site