Buying a used car from a private seller can be a smart way to save money, but most buyers don’t have the cash to pay in full. That’s where a private-party auto loan comes in. This type of financing is designed specifically for purchases between two individuals, rather than from a dealership.
With a private-party auto loan, you borrow from a bank, credit union, or online lender to cover the cost of the car, then repay it over time in monthly installments. It can open the door to more vehicle options, potential savings, and direct negotiations with the seller—while still spreading out the cost.
These auto loans can be ideal for buyers who find the perfect car in a classified ad, through a friend, or on a site like Craigslist or Facebook Marketplace, but need financing to make it happen.
Key Takeaways
- A private-party auto loan finances a car purchase directly from an individual seller instead of a dealership.
- Buying from a private seller can mean more choices and potential savings.
- These loans may have more steps, higher rates, and a greater risk of hidden issues.
What is a private-party auto loan?
A private-party auto loan is financing you get from a bank, credit union, or online lender to buy a used car from an individual seller instead of a dealership.
You borrow the purchase amount, then repay it over time with interest. The loan is tailored for private sales, making it easier to buy the car you want without paying the full price upfront.
This type of loan can be useful if you find a vehicle through classifieds, online marketplaces, or a personal connection.
Pros & Cons of Private-Party Auto Loans
Private-party auto loans can open up more options and help you save money when buying from an individual seller, but they also come with added steps and possible risks. Knowing the pros and cons can help you decide if this type of financing is the right fit.
Pros
- More vehicle choices: Private sellers can offer different makes, models, and years than you might find at a dealership.
- Potential cost savings: Without dealer markups or overhead, private sellers may list cars at lower prices and be more open to negotiation.
- Direct information from the owner: You can ask the seller about the car’s history, maintenance, and any unique features.
- Avoid dealer fees: Many dealership add-on charges, such as documentation fees, do not apply in a private sale.
Cons
- Extra transaction steps: If the seller still owes on their loan, that balance must be paid before the title can be transferred.
- Higher interest rates: Some lenders charge more for private-party loans because they see them as higher risk.
- Risk of hidden issues: Without a warranty, you may face expensive repairs if problems surface after purchase.
- Limited warranty coverage: Unless the manufacturer’s warranty is still active, the car is typically sold “as is.”
How to Get a Private-Party Auto Loan
Getting a private-party auto loan takes a few steps, but planning ahead can make the process faster and easier. Here’s how to move from finding the car you want to getting the keys in your hand.
1. Choose the Vehicle
Find the car you want and gather details like price, mileage, and the vehicle identification number. These will be required for the loan application.
2. Check Your Credit Scores
Your credit scores affect approval and interest rates. Review them before applying so you know where you stand and can fix any errors.
3. Compare Lenders
Look at banks, credit unions, and online lenders that offer private-party auto loans. Rates and terms can vary by several percentage points.
4. Apply for the Loan
Submit your application with the required vehicle and personal information. Many lenders provide an approval decision within one to three business days.
5. Finalize the Sale
If approved, the lender will either pay the seller directly or issue a check. If the seller still has an outstanding loan, the lender will arrange payoff before transferring the title.
6. Complete the Transfer and Registration
Make sure the title is in your name and the vehicle is registered. Provide proof of registration to your lender.
7. Start Repayment
Set up payment reminders or automatic drafts to avoid late fees and protect your credit score.
Best Private-Party Auto Loan Lenders
Private-party auto loans are widely available, and some lenders offer competitive rates, flexible terms, and perks that make buying from an individual seller easier. Here are a few options to consider.
myAutoLoan
As an online marketplace, myAutoLoan works with partner lenders to help you compare offers. Rates start around 6.49 percent, terms go up to 84 months, and the minimum credit score requirement is typically around 600. Co-borrowers are allowed, which can be helpful if your credit report needs improvement.
Digital Federal Credit Union (DCU)
Starting rates are often around 5.49 percent, with terms up to 84 months. DCU allows you to borrow up to 130 percent of the car’s value and offers the same rates for both new and used vehicles.
Navy Federal Credit Union
Rates can start as low as 4.99 percent, with terms up to 72 months. Loan amounts can be as small as $250. Discounts are available for active-duty or retired military members, and co-applicants are welcome.
PenFed Credit Union
PenFed offers rates starting around 4.99 percent, with terms from 36 to 84 months and loan amounts up to $150,000. You can check rates without affecting your credit score, and borrowing up to 125 percent of the car’s value is allowed.
PNC Bank
Rates start near 5.34 percent with autopay, and terms range from 12 to 84 months. Loan amounts typically fall between $5,000 and $100,000. PNC can also use part of your loan to pay off an existing balance if the seller still owes money on the car.
Local Credit Unions
Many local credit unions offer highly competitive rates—sometimes starting around 4.15 percent—and may provide discounts for members who enroll in autopay or purchase certain types of vehicles. Checking with your own credit union could reveal one of the best deals available.
Online Lenders for Private-Party Purchases
Most online-only banks no longer offer dedicated private-party auto loans, but some personal loan lenders can still fund these purchases. Personal loans are unsecured, so they close quickly and don’t require a title transfer, but rates are often higher than traditional auto loans.
Credible
Credible is an online loan marketplace that lets you compare personal loan offers from multiple lenders with one application. Loan amounts range from $600 to $100,000, and funding is often available within a few days.
LightStream
LightStream offers personal loans from $5,000 to $100,000 with terms up to 84 months. Funds can be deposited as soon as the same day for well-qualified borrowers.
Upgrade
Upgrade provides personal loans from $1,000 to $50,000, with terms up to 84 months. The process is fully online, and funds can be sent directly to your bank account.
Final Thoughts
A private-party auto loan can be a smart way to buy from an individual seller, especially if you find the right car at the right price. It opens up more choices, gives you room to negotiate, and can help you avoid dealership markups.
That said, these loans can come with extra steps, possible hidden issues, and higher interest rates. Comparing lenders, getting a mechanic’s inspection, and knowing your budget before you apply can help you avoid surprises.
The best financing option is one that fits your needs and keeps your monthly payments comfortable. Take the time to shop around, review terms carefully, and choose a loan that makes sense for your situation.
Frequently Asked Questions
Can I get a private-party auto loan with bad credit?
Yes, you can get a private-party auto loan with bad credit, but your interest rate will likely be higher. Some lenders work specifically with borrowers who have lower credit scores, so it’s worth comparing offers. Make sure the monthly payment fits your budget before committing.
Can I use a private-party auto loan to buy a car from a family member?
Yes, you can use a private-party auto loan to buy a car from a family member. Just be sure to handle the transaction like any other sale, with a bill of sale, proper title transfer, and registration in your name.
Do private-party auto loans require a down payment?
Many lenders require a down payment for a private-party auto loan, often ranging from 10 to 20 percent of the purchase price. The amount can vary based on the lender, your credit history, and the vehicle’s value.
Can I refinance a private-party auto loan later?
Yes, you can refinance a private-party auto loan if you find better rates or want a lower monthly payment. Refinancing works the same way as with any other auto loan, but your eligibility will depend on your credit profile and the car’s age and condition.
What cars qualify for a private-party auto loan?
Most lenders set requirements for the vehicle’s age, mileage, and condition. For example, a lender might not finance cars over 10 years old or with more than 150,000 miles. Check the lender’s guidelines before applying to avoid delays.
