What Is A Private Party Auto Loan

A Private Party Auto Loan is any auto loan that is not provided by a dealership. Typically these loans are used to buy used cars from private sellers. But, There are some situations where it makes sense to use a private party loan to buy from a dealership instead of a dealership loan (I'll cover that in a future post).

This type of loan is fairly flexible and there are many institutions that offer them. These loans come in many different shapes and sizes depending on the institution providing the loan, the situation, and the buyers credit history. However, in general there are some differences between dealership loans and private party financing.

The typical loan term for a dealership loan is 72 months or 6 full years. On the other hand, a private party loan is typically only offered up to 48 months or 4 years. As a result you will often have to make higher monthly payments on a loan of the same amount. If you can make the payments though, you will end up paying a lot less in interest over the course of the loan which is certainly a plus.

The rate offered with this type of loan is often slightly higher than that of a dealership loan, though this is not always the case. Regardless, with a shorter duration you still usually end up paying less interest overall. In addition the added flexibility of this loan can often make up for the higher rate.

Private party auto loans are available to people who do not have perfect credit. If you have been rejected for a dealership loan you may want to consider a private party loan. Plus if you have bad credit, being accepted for a loan where you can make the payments can help repair your credit history.

Unlike dealership loans, private party loans often do not require a down-payment. This can be good if you are strapped for cash. Just be careful because down payments help keep the principal of the loan bellow the total value of the vehicle.

Like I mentioned earlier private party auto loans are available from a variety of institutions. However I've found the best deals are found through your existing bank because they know you and your history, or through micro-lending sites like LendingClub.