BEST OF

5 Lenders That Offer Private-Party Auto Loans

Many lenders don’t finance cars bought from private sellers, so it may take some effort to find a private-party auto loan.

May 19, 2022

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If you buy a car from a private seller instead of a dealership, you may need to find a private-party auto loan. Private-party auto loans are used specifically to finance the purchase of a car from an individual, such as a family member or owner on sites like Craigslist.

Finding a private-party auto loan may not be a simple task, because many lenders don’t offer them. To save you some time, NerdWallet has identified some of the places where you can apply for a private-party auto loan.

Lenders That Offer Private-Party Auto Loans

MyAutoloan
Learn more

on MyAutoloan's website

MyAutoloan - Used car purchase loan

MyAutoloan

Est. APR

2.24-24.99%

Loan amount

$8,000-$100,000

Min. credit score

575
Learn more

on MyAutoloan's website


Min. credit score

575

Key facts

Best for applicants wanting to quickly receive loan offers from multiple lenders for the purchase of a used vehicle from a dealer or private party. Bad- and fair-credit borrowers may qualify.

Pros

  • Applicants can receive up to four lender matches with a soft credit check.

  • Most lenders can provide approval within 30 seconds of application submission.

  • Provides lowest daily rates on website, including used auto and private party purchases.

  • Some marketplace lenders offer rate discount with automatic payment.

  • Allows co-signers.

Cons

  • May result in multiple contacts from different lenders.

  • Social Security number required to submit initial application.

  • myAutoloan.com offers limited customer service support.

  • Not available in a few states.

Qualifications

  • Minimum annual gross income: $26,100.

  • Maximum debt-to-income ratio: Not provided

  • Bankruptcy-related restrictions: Must be discharged or dismissed.

  • Maximum mileage: 125,000.

  • Maximum loan to value ratio: Not provided.

Read Full Review
LightStream
Learn more

on LightStream's website

LightStream - Used car purchase loan

LightStream

Est. APR

4.49-9.99%

Loan amount

$5,000-$100,000

Min. credit score

660
Learn more

on LightStream's website


Min. credit score

660

Key facts

Best for borrowers with good or excellent credit looking for a flexible, no-hassle used car loan.

Pros

  • Competitive rates, with used car rates the same as new car rates.

  • No vehicle or mileage restrictions.

  • Finances purchases from private parties.

  • Offers rate discount with automatic payment.

  • Has loan experience satisfaction guarantee.

  • No origination or late fees.

Cons

  • Hard credit inquiry required.

  • High minimum credit score required.

Qualifications

  • Minimum annual gross income: None.

  • Maximum debt-to-income ratio: Did not disclose.

  • Bankruptcy restrictions: Yes. Details not disclosed.

  • Maximum mileage: None.

  • Maximum loan to value ratio: None.

Read Full Review

Digital Federal Credit Union - Used car purchase loan

DigitalFederalCreditUnion

Est. APR

1.99-11.24%

Loan amount

$2,500-$500,000

Min. credit score

Did not disclose

Min. credit score

Did not disclose

Key facts

Best for applicants looking for more flexibility and fewer restrictions when financing a used car.

Pros

  • Maximum vehicle mileage higher than other lenders.

  • No maximum vehicle age.

  • Has a 24-hour access consumer loan call center.

  • Finances vehicles purchased from private parties.

  • Offers two opportunities for discounts on already low rates.

  • Allows co-signers.

Cons

  • Submitting an online purchase loan application results in a hard credit inquiry.

  • Credit union membership required to get a loan.

  • Social Security number required with initial application.

Qualifications

  • Minimum annual gross income: None.

  • Maximum debt-to-income ratio: 60%.

  • Bankruptcy restrictions: No bankruptcies in the previous 12 months.

  • Maximum mileage: 250,000.

  • Maximum loan to value ratio: 135%.

Read Full Review

PenFed Credit Union - Used car purchase loan

PenFed Credit Union

Est. APR

3.19-17.99%

Loan amount

$500-$100,000

Min. credit score

Did not disclose

Min. credit score

Did not disclose

Key facts

Best for applicants who use the PenFed online car buying service to get a discount on rate and used vehicle pricing.

Pros

  • Provides up to six offers with various rates and terms using a soft credit check.

  • Minimum loan amount is lower than other lenders.

  • Finances vehicles purchased from private parties.

  • Offers online car buying service with discounted pricing and rate.

  • Application process can be 100% online.

Cons

  • Credit union membership required to get a loan.

  • Must use PenFed online car buying service to get a rate discount.

  • Social Security number required with initial application.

Qualifications

  • Minimum annual gross income: None.

  • Maximum debt-to-income ratio: Did not disclose.

  • Bankruptcy restrictions: Did not disclose.

  • Maximum mileage: 125,000.

  • Maximum loan to value ratio: 125%.

Read Full Review

Bank of America - Used car purchase loan

BankofAmerica

Est. APR

N/A

Loan amount

$7,500-Max. not disclosed

Min. credit score

Did not disclose

Min. credit score

Did not disclose

Key facts

Best for applicants who qualify for a Bank of America Preferred Rewards rate discount or want the convenience of purchasing and financing a used car at a Bank of America-authorized dealer.

Pros

  • Apply online, by phone, in a financial center or at an authorized dealership.

  • Offers rate discount for customers with qualifying account relationship.

  • Usually provides loan decision within 60 seconds of application submission.

  • Finances vehicles purchased from private parties.

  • Provides Spanish version of website.

Cons

  • Minimum loan amount is higher than other lenders.

  • Social Security number is required to submit initial application.

  • Rate discount available only with deposit balances of $20,000-plus.

  • Won't finance vehicles purchased at independent dealers not affiliated with auto manufacturers.

Qualifications

  • Minimum annual gross income: Did not disclose.

  • Maximum debt-to-income ratio: Did not disclose.

  • Bankruptcy restrictions: Did not disclose.

  • Maximum mileage: 125,000.

  • Maximum loan to value ratio: Did not disclose.

Read Full Review

How do private-party auto loans work?

For the most part, applying for a private-party auto loan is the same as for any other type of auto loan. While the loan is similar, the transaction itself is not: You as the buyer will do much of the work a dealer would otherwise do.

  1. You won’t have a dealership to handle financing and related paperwork. When you buy from a dealer, a finance officer will typically arrange your financing or work with your lender to finalize the loan paperwork. When you buy from an individual, you will find your own loan and work directly with the lender.

  2. You (or your lender) will have to pay off any existing liens on the car. If an individual is still paying on a car’s loan, that car can’t be sold until the loan is paid off and the lender releases the car’s title. When you buy a used car from a dealer, any payoff of a previous loan and title transfer is handled for you. When you buy from a private seller, your lender may assist with paying off a previous loan, but it is still your responsibility to ensure this is done.

  3. You will have to provide vehicle documentation to your lender. Again, a dealer normally handles this aspect of the car-buying process. When you get a private-party auto loan, your lender will ask you to provide information such as the following (depending on your state’s requirements).

    • Vehicle identification number, or VIN.

    • Car year, make, model and mileage.

    • Copy of the vehicle registration and title or title status.

    • Whether the car has an existing lien and the amount to pay if off.

    • A bill of sale listing the details of the purchase, sale price, date of sale and names/addresses of the buyer and seller.

  4. You may need to know the exact car you are buying before you apply. When comparing lenders, be aware that some will require you to know the exact car you want to purchase before you apply. Other lenders are willing to preapprove a private-party auto loan before you’ve selected a vehicle. But you won’t know the exact terms of your loan until you have information about the car and the final amount you need to borrow.

  5. You will have to handle the transfer of ownership. Even after you have your private-party loan lined up, your work isn’t complete. Many steps that a dealer would typically manage, such as registering the vehicle and completing the title transfer with the Department of Motor Vehicles, will be up to you. You will also be responsible for paying any sales tax and fees when registering the car. And some states require a bill of sale along with an odometer disclosure statement. Check with your state’s DMV to determine the requirements.

  6. Private-party auto loans tend to have higher rates. As with any other auto loan, the rate you receive for a private-party auto loan depends on your credit history and credit score. But private-party auto loans usually have a higher rate when compared with other used auto purchase loans. That’s because a lender takes on greater risk when making a private-party auto loan, so the higher rate is to compensate for that risk.

  7. You can avoid dealer add-ons and fees. One of the advantages of buying from a private seller is the likelihood of paying less for the car than you would at a dealership. But car price isn’t the only way to save. When buying from an individual, you won’t be subjected to heavy sales pitches for add-ons, such as warranties. You also won’t run the risk of having extra services and fees added to the overall cost of the car without your knowledge.

If you can’t find a private-party auto loan

Without a private-party auto loan, your options to pay for a privately purchased car are somewhat limited.

You could use a personal loan. Some lenders that advertise private-party auto loans, like LightStream, are actually promoting unsecured, personal loans. Since personal loans don’t use your vehicle as collateral, loan approval depends more heavily on your credit history and income, meaning they are more challenging to get. Also, personal loan rates are usually higher than private-party auto loan rates.

You could also pay from your own savings — with cash, a cashier’s check or money order. Some sellers won’t accept cashier’s checks due to the potential for fraud, or they may want to meet at your bank to ensure the check isn’t forged. If you do pay with cash, it’s a good idea to get a bill of sale with the agreed-upon purchase price as proof of payment.

To protect yourself, consider using an escrow account service when paying. Your payment for the car will go into an escrow account for safekeeping, and the money isn’t released to the seller until you have the car’s title. Make sure to choose the escrow company yourself, since scam artists have been known to use fake escrow accounts.

Why many lenders don’t offer private-party auto loans

When lenders make an auto loan, they want the assurance that a car’s value will enable them to recoup any loss if the borrower defaults on the loan. In other words, the lender can repossess a car and sell it for enough to pay the outstanding loan balance.

Lenders take on greater risk when financing a car purchased from an individual as compared with a dealership. Dealerships operate under state and local laws that protect consumers. The used cars they sell have typically passed an inspection and come with some type of warranty. Dealers also have more experience in detecting issues like odometer tampering or stolen vehicles that have been retitled. These same protections aren’t in place when a car is purchased from an individual.

Also, dealers handle nearly all of the paperwork for car buyers, making the process easier for lenders. When lenders work directly with a car buyer who may not be familiar with paying off an existing lien or transferring a title, it can result in a slower process and more work for the lender.

If you find a lender willing to make a private-party auto loan to you, keep in mind that you’re also taking on greater risk and a high level of time commitment. But if you know what you’re committing to and how to protect yourself when buying a car from a private party, you will be in a better position to bypass the dealership and possibly find the car you want for less money.

Last updated on May 19, 2022