Editor's choice: Carvana
- Most credit types welcome
- 45-day preapproval
- Seven-day guarantee
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Getting a loan for a private car sale works a little differently than when you buy used or new from 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 and may require stronger personal credit.
A private party auto loan is when you borrow from a lender to purchase a car from a private seller rather than a dealership. You’ll need to have a specific vehicle picked out to apply. Your lender will then pay the seller directly, and you’ll be responsible for repayments — which will work the same as any car loan.
Keep in mind that you may face higher interest rates and it may take longer to process, especially if the current owner still owes money to a bank or other lender.
You can borrow from online lenders, banks and credit unions — but not every lender offers loans for private purchases.
You’re most likely to find private party auto loans through online lenders. To get started, you can work with a direct lender like LightStream or use a comparison service like LendingTree — or browse our table of lenders to see which offers a good deal on your private party purchase.
Some banks — like Chase, Wells Fargo and Capital One — don’t offer loans for private purchases. However, you can still find good deals from other banks, including:
|Bank of America||Starting at 5.69%||Read review|
|PNC Bank||6.59% to 8.69%||Read review|
|SunTrust via LightStream||4.99% to 10.49%||Read review|
|USAA||Starting at 2.79%||Read review|
Rates checked on September 28, 2020
Follow these steps to secure financing for a private purchase:
Though you can often nab a lower sticker price by buying a used car through a private seller, you may get stuck with less competitive rates and terms on your loan.
Each lender has different eligibility requirements, though you typically must meet a few basic criteria to qualify.
Many lenders also have restrictions on the age and mileage of the car you’re looking to purchase. In general, the older the car, the more expensive the loan.
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’s a double risk. You might have better luck using an online connection service, though make sure you’re not working with one that specializes in dealership financing.
You also might want to save for a down payment, since it’s typically easier to get approved for smaller loan amounts. And like with other loans meant for people with bad credit, you’ll probably end up with a higher interest rate.
Keep these pointers in mind when buying a used car from a private party:
Getting a car 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. Not all lenders will finance private party purchases, however, so compare your car loan options before negotiating with a seller.
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