If you’re trying to pay for a vehicle you buy from a person and not a dealership, you want to know how to get a car loan for a private seller. This is also known as a private party car loan. Here are some tips to make the process go smoother.
- Get a copy of your credit report. – Before you even try to figure out how to get a car loan for a private seller transaction, you need to have a copy of your credit report. Why is this important? What you’ll wind up paying in interest rate for your loan depends on you having good credit. The lower your credit score, the more you’ll pay in interest – if you can even get a loan. You can obtain a free annual credit report from the nationwide credit reporting agencies through AnnualCreditReport.com. Be sure to clear up any discrepancies you find on the report. If you’ve missed some payments, work on bringing up your on-time payments by giving yourself at least six months to turn things around. Remember that lenders always order a credit check before they consider lending you any money.
- Check multiple sources for the best deal. – If you want to know how to get a car loan for a private seller, it’s no secret that you have to do the legwork required. In fact, the only way you’ll know that you’re getting the best deal on rates is to shop around. Check online for lenders that offer private party auto loans – there are a few of them, but you’ll have to search them out. Times are tough and lenders for this market aren’t plentiful. You can also check with your credit union, the bank where you have your home mortgage or multiple accounts. You may be able to secure a personal loan with property as collateral. Finally, you may wish to consider borrowing money from a family member or friend. But be sure to have a contract drawn up.
- Expect to pay higher interest rates. – Companies that provide auto loans for private party transactions charge higher interest rates in order to make the business profitable for the risk they’re undertaking. For new cars, it’s about 2 percent higher, while for used cars it’s around 1 percent higher. Of course, the interest rate you’ll pay will be determined by your credit history and rating score. You goal is to pay a reasonable, but not outrageous amount of interest, and strive for the lowest term possible.
- Taxes, title and registration are extra. – Be aware that you’ll need to pay any taxes, title and registration fees separate from the loan for the private party auto transaction.
In summary, when the time comes and you need to know how to get a car loan for a private seller, follow these simple steps and be persistent.