If you intend to purchase a car from a private seller, then asking “how does a car loan work with a private seller” is very important as it will help you alot in financing that car from whoever is selling it.
There are several ways of owning a car and that includes buying from a private seller. However, what do you do if you don’t have the full amount needed to purchase that car? What option is available for people like you to purchase a car from a private seller?
Well, there is hope for you as there are car loans for persons who wish to purchase their car from a private seller except for the fact that not all lenders offers such loans. But don’t worry, by the time you’re done reading this write up, your question “How Does a Car Loan Work with a Private Seller” will be answered in detail.
READ ALSO: How Does A Preapproved Car Loan Work?
What A Car Loan With A Private Seller Is About
Car loan with a private seller is simply that loan you’re offered by a lender so you can purchase your car from a private seller other than a dealership. Such loans are normally called Private Party Auto Loans.
Buying from a private seller is cheaper than at the dealership because they are usually used cars the seller is probably trying to get rid of hence makes it possible for you to bargain for a better price. However because they do not offer financing themselves and you also cannot cough up the amount needed to purchase the car, a Private Party Auto Loan becomes necessary.
There are lenders who offer Private party auto loans to borrowers so they can purchase their car from a private seller. In this case, the car is used as a collateral for the loan hence failure to pay back the loan will mean that the car will be repossessed by the lender.
Alternatively, you can go for an unsecured personal loan to finance it although they have a higher rates as compared to private party auto loans.
Generally, theseare the documents required when applying for a private party auto loan;
- Government issued ID
- Proof of residence
- Social Security Number
- Proof of employment
- Proof of income
- Copy of the car’s registration
- Vehicle Identification Number (VIN)
- Front and back copy of the title to the car
READ ALSO: How Does Car Finance Work in the UK?
How Car Loan Work With A Private Seller
Private party auto loans works almost the same way as other types of loans. So the usual things you will hear is credit score, interest rates/ APR, etc. except that not all auto lenders offer this type of loan.
Borrowers who wish to get a car loan with a private seller must examine themselves in terms of credit score and affordability to see if they qualify for a loan or not. Because like it or not, lenders take into consideration ones credit score/ credit worthiness before granting loans. So to be on the safer side, check your credit before applying. If its not good enough, wait till its good enough else you may not qualify for a loan or your loan will come at a higher APR or interest rate.
Once you’re satisfied with your credit score, you can now hunt for your desired car. Lenders have certain requirements when it comes to the type of car they can finance hence you must choose a car before applying for a private car loan so can determine whether to finance such a car or not.
They usually check the age of the car and its total distance covered, etc. So although you may want to go in for a less expensive car, you should also consider getting a car that is good enough to qualify for financing. Discuss the price with the private seller before applying at the lender.
But before settling on which lender to use, it’s best you apply to at least two or three lenders within a 14 day period. During this period, any credit enquiry that will be done by these lenders will be counted as one.
Now compare the terms and rates of each lender before settling on the one that is best for you. Consider the loan term, interest rate, additional fees if any, etc. before settling on your preferred lender.
However note that, although a longer loan term means you pay less in monthly installments, it also means that you end up paying more in interest. Hence you may want to look at that as well so you can opt for a shorter term if possible.
You can now go ahead and sign the loan agreement form of a lender of your choice.
READ ALSO: How Does A Guarantor Car Loan Work?
Where To Get A Car Loan With A Private Seller
As mentioned earlier, not all lenders offer Private party auto loans. Lenders such as Chase and Capital One Auto Finance only finance cars bought at dealerships.
However, the likes of LightStream, Bank of America, PNC Bank, MyAutoLoan, First Credit Union etc are some of common lenders that offer Private party auto loans.