What is a Private Party Auto Loan?
If you choose to buy from a private dealer then you may need to look into getting a private-party loan. This is a term that is rarely heard but something that can make your car buying process easier if you are looking to avoid a dealership. A private party loan is a loan from a bank that is specifically for private sellers.
How do private-party loans work?
This is a type of loan that works just like a secured auto loan, with the collateral being the car that you are purchasing. Just like auto loans, this loan also has an annual percentage rate (APR) and a fixed loan term that dictates your monthly payment. A private party loan typically can range from 1 to 7 years. The APR can also be varied just depending on your credit score, the loan amount, the state you live in, and more.
Where can you find a bank that offers private-party loans?
Private-party loans are offered at a variety of banks whether by large banks like Bank of America or Wells Fargo to as small as regional banks, online lenders, or credit unions.
Should you compare loans?
Yes! It is always smart to get quotes from multiple lenders and compare them to ensure that you are getting the best deal. Be sure not to apply for these loans until you are ready because even if you apply and get approved, you will see these hard inquiries on your credit. These hard inquiries can hurt your score if you do not utilize the approved loans, so make sure you are aware!
How to go about applying for a private-party loan?
To properly apply for a private-party loan, you will need to fill out the application that was offered by the lender you chose to bank with. You will need to provide information about the car like the VIN, make and model, model year, and mileage. You will also need to provide personal information like your SSN, address, income, and employment. Not all information needed is the same across lenders so it will vary depending on who you choose. The lender may also need specific types of documentation like the vehicle title, registration, bill of sale, etc. Once approved the money may either be written as a check or as a loan deposited into your bank account.
Private-party loan not an option?
If you are looking for a different type of loan, then an unsecured personal loan might be the alternative you are looking for. Unsecured loans often have higher interest rates because the loan is not backed by collateral, like a car. When deciding which loan is best for you, you need to look at what you are trying to get out of the loan and what best aligns with your lifestyle. However, the best bet is to look into private-party loans. These loans will most likely yield the best results when financing with a private seller. Make sure to discuss with your bank what they feel would be best for you and your situation as well!