Buying a car from a private party can get you a good deal, but it can be difficult to get approved for financing a vehicle if your credit score is low. Here is the scoop on direct auto loans for private vehicles.
Private auto loans
To get an auto loan to pay for the vehicle from a private seller, you need a direct auto loan. They are a little different from the third party loans that you get through lenders who have signed up with dealers. such as subprime lenders and captive auto lenders. They usually only deal with vehicle financing for cars on a dealership’s lot.
Direct lenders include credit unions, banks, and online lenders. Although there are many such lending institutions, they are not always able to help borrowers with poor credit.
Many direct auto lenders require a credit score above 660. Borrowers with tarnished credit histories may even have difficulty financing a private seller’s car if their credit rating hits the threshold. It all depends on the auto lender you are working with.
If you have a history with a particular financial institution, it can increase your chances of getting approved. For example, credit unions may be able to work with you in certain circumstances because they are owned by their members. If you’re a long-time member of your credit union and your accounts have always been in good shape, they may be willing to work with you despite a less than perfect credit score. But again, this is not a guarantee.
Vehicles from private sellers can be risky
Aside from the potential difficulty in getting approved for an auto loan with poor credit, private cars carry a bit more risk than a car from a dealership.
Typically, vehicles outside of a dealership’s lot have been inspected, prepared for sale, have clean titles, and may even be accompanied by a vehicle history report and maintenance logs. Dealers prefer to sell cars in good condition, and because they are a bit more careful with their lot selection, this can provide the lender with more assurance that the vehicle is a good investment.
Private sellers, on the other hand, can make a direct lender suspicious. You may need to schedule a third party vehicle inspection of the private seller’s car before you can be approved for a loan. A vehicle at risk of mechanical failure is not a good investment for you or the lender.
Additionally, direct lenders have vehicle age and mileage requirements that must be met to be eligible for financing. If the private car you’re looking to buy is older (10 years or more), it might be difficult to get approval.
The dealership may be a better choice for bad credit borrowers
If your heart is set on a private seller car but your credit is worse for wear and tear, you may run into a few hurdles in obtaining financing. Not only may direct lenders be reluctant to approve a loan to a borrower with credit problems, a private car presents its own challenges, as it may not be in as good a condition as selecting a franchise dealership. .
While it is possible to get a good deal on the vehicle from a private seller because they don’t have overheads like a dealership, the risk of buying a lemon is there. There is also this risk with a dealership, but remember that they are often inspected before the sale.
When your credit score isn’t the highest, it might be worth considering subprime financing. Subprime lenders are bad credit auto lenders registered with special finance dealers. They often help borrowers in unique circumstances, such as bankruptcy, lack of credit, first-time buyers, etc. Applying to direct auto lenders who cannot help bad credit borrowers can lead to wasted time, energy, and mental exhaustion. Ignore all of this and work with us at Express auto loan!
If you need a vehicle now, complete our free auto loan application form today. We will do the work of finding a special financing dealer in your area at no cost and without obligation.