by Andrew Rohrlich

Are you in the market for a used car but don't want to go through a dealership? Then, a private party sale might be the right option for you. Buying a car from a private party can save you money, and it's easier than you think. However, if you can’t cover the full cost of the car, you’ll need to source your own loan for a private party car sale.

Can you get a car loan for a private sale? Yes, and having the right knowledge can make it easier.

In this article, you'll learn how to get a car loan for a private sale and some tips on how to qualify. You'll also find out where to go for the best loan options and additional factors that may affect your loan.

How Do Car Loans for Private Sales Work?

A car loan for a private party sale works the same as any other car loan. When approved, you receive money from the lender to buy a car and make monthly payments until the loan is paid off.

Types of Loans

There are two main types of car loans for private party sales — unsecured personal loans and private party auto loans.

Unsecured Personal Loans

An unsecured personal loan is a loan that's not backed by collateral. That means the lender can't seize your car if you can't make your payments. Unsecured personal loans are more challenging than other types because they're riskier for the lender. As a result, the interest rate may be higher or loan approval may be more difficult.

If you have good credit, you might be able to get a car loan for a private sale with low interest. While qualifying for an unsecured personal loan may be easier than a private party auto loan, the loan terms are usually not as favorable to you.

Private Party Auto Loans

Private party auto loans are available from many different lenders. and have several advantages over unsecured personal loans. However, they can be more challenging to qualify for if your credit score is low. You’ll also require your  vehicle identification number so your lender can ensure your vehicle is free and clear of any liens or encumbrances.  And you may be more likely to require documentation like proof of income or employment.

Loan Terms

The terms of your loan will depend on several factors, including your credit score and income and the age and value of the car. You may be able to get a loan with terms as long as 72 months with some lenders, though in the private party world that’s typically the cap.

Remember that the longer the loan term, the more interest you'll pay over the life of the loan. You want to shop for loan terms that fit your budget and financial needs. The extra effort on the front end of the process will save you from a lot of stress on the back end.

Unsecured personal loans typically have shorter terms than private party auto loans. That means you'll have to pay off the loan over a shorter period of time.  

Where Can You Get a Personal Loan To Buy a Car?

You can get a personal loan to buy a car in several places. Banks, credit unions, and online lenders all offer personal loans.

Your Current Bank

If you have a good relationship with your bank, you may be able to get a competitive rate on a personal loan. However, some banks — like Bank of America — may have stricter eligibility requirements than other lenders.

You'll need good credit and a steady income to qualify for a loan from a bank. And even if you qualify, you should still compare with other lenders to ensure you're getting the best interest rate.

Credit Unions

Credit unions can at times have lower interest rates than banks. And they may be more willing to work with you if you have a good relationship with them.

You'll need to become a credit union member to get a loan from a credit union, but the process is often pretty simple if you’re not already one. In addition, you'll usually need to meet specific eligibility requirements, such as living in a particular area or working for a certain employer.

Once you're a member, you can apply for a personal loan, and they will review it and decide.

Online Lenders

Online lenders are a good option if you have a lower credit score. That's because online lenders typically have more lenient eligibility requirements than banks or credit unions.

You'll need to fill out an application and provide personal and financial information to show your eligibility. You may also need your social security number, proof of income and employment.

Minimum loan amounts may apply. Once you've submitted your application, the lender will review it and decide. You'll usually get your loan funds if approved within a few days. The money will be deposited into your bank account, and you can use it to buy the car you want.

Qualifying for a Private Party Auto Loan

You'll need to meet the lender's eligibility requirements to qualify for a private party auto loan. These requirements vary from lender to lender, but some general conditions are common among lenders.

Credit Score

A credit score is one of the most critical factors, as lenders use it to assess your likelihood to make on time payments throughout your loan.

Annual Income

Your annual income is another important factor. Lenders use your income to assess your ability to consistently afford the payment. Some lenders may have minimum income requirements, so it's wise to check with the lender before you apply.

Vehicle Age and Vehicle Title

Lenders will also consider the vehicle age you're looking to purchase. Older cars may be more difficult to finance than newer ones. And some lenders may not finance vehicles over a certain number of years old.

A clean title for the vehicle is also often required. If the car you're looking to purchase has a salvage title, it may be more challenging to get a loan.

Loan Options You Should Avoid

There are a few loan options you should often avoid when you're looking to finance a private party auto purchase.

• High-interest loans. Some lenders, such as payday and title lenders, offer high-interest loans. These often have very high-interest rates and fees, making them difficult to repay.

• Long-term loans. Long-term loans can be helpful if you're looking to finance a costly vehicle. But these loans typically have higher interest rates.

• Predatory loans. Some lenders may offer loans that sound too good to be true. These loans may have very high-interest rates, hidden fees, and strict repayment terms. If you're offered a loan that seems too good to be true, read the fine print before applying.

Getting a loan for a private party auto purchase doesn't have to be complicated. Many loan options are available, and you should compare several before deciding which one is right for you.

Make sure you shop around and compare interest rates, fees, and monthly payments before applying for a loan. If you're unsure about a loan offer, ask questions so you understand the terms and conditions before you sign any paperwork.

This article was written by Andrew Rohrlich. As a brand and product marketing expert, Andrew Rohrlich has crafted products, experiences and communications for household names like Gap and for multiple automotive technology businesses. For nearly a decade Andrew has studied automotive retail in depth from a customer point of view and aggregated the industry’s best research, thought leadership and know how to provide credible and important information to auto shoppers and sellers.

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