Private Party Auto Loans for Poor Credit

When you are sitting in an auto dealership and being humiliated by a loan officer as he says again and again, “I can’t do much for you. Your credit score is not very good. I’ll see what I can work out,” etc., you need to know that other options exist.

You don’t necessarily have to sit in such an office and feel rushed to sign your name to a document that will have largely unfavorable terms for you. No car is worth that!

It might be a good use of your time to shop around a bit for a private party auto loan available even to those who have bad credit.

Pros

These are the benefits of securing a loan through a private party.

  • You will benefit from the healthy competition that exists among possible lenders, from banks to credit unions to online lenders. There are even online brokers that can shop around for you and find a good quote within minutes.
  • You will know almost for certain whether or not your prospective lender will work with people with bad credit and not make them feel horrible for being in such a financial state. You don’t have to spend time discussing the problem with lenders that will not give you any money anyway. This saves a lot of time and possible embarrassment.
  • Even though your interest rate might be higher than you anticipated, the payback period might be shorter as well. That means that you are not locked into a bad loan for five years. That could end up saving you money. That also means that your car will still be worth something when you pay it off in three years rather than five, for instance.
  • When you are approved for a private party auto loan, you already know how much you can spend. That eliminates the aggravating bargaining that many auto salespeople try to get into with you at the dealership. There will be no question that you can spend X amount of dollars and no more.

Cons

The biggest downsides of private party loans are:.

  • Shorter repayment periods might not work for you because the monthly amount will be significantly higher than with a standard auto loan. Paying off $20,000 over five years can mean monthly payments of $400/month for instance; that same amount over three years means plunking down about $600/month. That difference could be too much for your budget to swallow.
  • In almost all cases, your interest rate on these loans will be higher than one obtained through a dealership. Prepare for that.
  • If you bypass a dealership’s finance department, you are also bypassing some of the dealer incentives, such as purchase security, which will help you if you lose your job.
  • If you are, in fact, a good bargainer and enjoy the process, acquiring a private party auto loan takes away one of your strengths. You are locked into a given amount with established terms as you walk into the dealership. That could be a negative if you are a good negotiator.