A man and another man are meeting about financing a car

Financing a Car from a Private Seller

Milad Hassibi April 11, 2018

Most banks and lenders commonly offer auto loans that let you buy a car from a private party, but consumers with poor credit will have a hard time getting approved for an auto loan for a private party sale.

Person-to-person car purchases are offered by a wide array of banks and other financial institutions. Most consumers do not have the resources to buy a car immediately in cash, leading them to turn to financial institutions for help.

The best method of getting a private party loan is by speaking to your local credit union or trusted bank. There are various websites where you can apply for a private party auto loan as well. However, before walking into the bank, it is best to be sure that you know your maximum budget. That way, you will be able to compare loans for the same amount from various lenders and see which one best fits you, in terms of interest rates and approvals.

By being pre-approved for a private sale auto loan, you can shop freely for vehicles without worrying about getting approved and losing the car of your dreams. As soon as you find your dream car, you go to your lender and receive a check for the buyer. Sadly, financing a private party car sale tends to be more difficult when you have less than stellar credit.

Just as with any loan, most lenders will do a “hard check” on your credit. However, most lendersWoman who just got approved for a car loan with a green text are reluctant to work with low credit consumers. Typically you will need to go through a “subprime lender”, a lender that works with consumers with bad credit. However, even most subprime lenders tend to work as indirect lenders alongside car dealerships. Sadly, this usually means that they do not finance private party car sales.

Being an indirect lender means that you cannot simply walk to the lenders business location and request a loan. Instead, these lenders have agents throughout dealerships that work to match consumers with a financing option best suited for them. Most lenders prefer to work in this arrangement for 2 massive reasons:

  • The Vehicle is Documented
    • There is a special relationship between the lenders and dealers, where the dealer guarantees that the car being financed is what the official paperwork says it is. This includes many variables like the vehicle age, mileage, options, and more. The most important document, however, is the vehicle title. For a lender to provide financing, the title must be clean (not salvage, rebuilt, etc.).
  • The Borrower is Legitimate
    • Many dealerships heavily verify their vehicle buyers. You may be required to bring in 2 forms of identification along with proof of employment and even more. This information is then sent from the dealerships to the lenders.

Final Note

All in all, if you have bad credit and are trying to finance a private party car sale, you need to find a subprime lender who can work within your budget and location. CrediReady offers one of the largest databases that connects dealerships, lenders, and buyers in all credit situations. Take a few moments to fill out our free and confidential loan search form online and we will match you with a dealership in your local area that can meet your auto financing needs.

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