While buying a car and getting it financed through a licensed dealership is easy, it’s typically also more expensive.
Many car buyers choose to buy a vehicle from a private party as that helps them save a considerable amount of money.
However, private sellers don’t offer any financing (and you need to do a lot of due diligence if they do), which is where a private party loan comes in.
Private Party Loan Explained
As you can tell based on what we discussed above, a private party loan allows you to get financing for a vehicle you want to purchase from a private seller.
Before we get to discussing how to get a private party loan, you must note that it usually comes with a higher interest rate than a typical auto loan, so the savings on cost of your vehicle should be significant enough to make sure it’s worth it for you to purchase from a private seller.
How to Get a Private Party Loan?
Just like all types of loans, you can get a private party loan from large and small banks as well as different credit unions. However, there are also many online business marketing agencies that can offer a private party loan, often at better rates and with an easier application process.
- Understanding the Restrictions
Different types of lenders may have different restrictions about the type and condition of vehicles they will finance, but the general restrictions are typically associated with the age and mileage of the vehicle.
While some lenders may have easier restrictions or no restrictions, but they will charge higher interest rates on older vehicles.
- Getting Multiple Quotes
The loan terms – including the interest rate – may differ significantly from one lender to another. So it makes sense to get quotes from multiple lenders and compare them carefully.
Remember, the interest rate shouldn’t be the only deciding factor. Other factors like the loan term, prepayment penalty, APR and more should be considered as well.
- Applying at the Same Time
When you’re applying for a private party loan, you may end up applying for a preapproval. However, the thing with preapprovals is that they tend to negatively affect your credit score.
So if you apply for multiple preapprovals, it may affect your credit score significantly in a negative way.
However, if you apply to them all at the same time, they all may be counted as one and the affect on your credit score may be insignificant.