Bank of america auto loan private party

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When you want to finance your next car without going through a dealership, you’ll need a private party auto loan. They can be more challenging to find than new- or used-car auto loans for dealership purchases, but it can be worth the search because buying a car from an individual can help you save money.

Not only do private sellers often charge less than dealerships, but they also often have cars for sale that you won’t find at a dealership. A private party can be the best way to find the car you want at a comfortable price.

What Is a Private Party Auto Loan?

A private party auto loan allows you to borrow money to buy a vehicle from a private seller, as opposed to a dealership. Here are some reasons you might want one:

• The car you want is only available through a private party
• Dealerships don’t offer cars in your price range
• The same car is often less expensive when you buy it from a private party instead of a dealer

What Does a Private Party Auto Lender Do?

A private party auto lender helps individuals purchase used cars from each other. Not only do they provide financing, but they can also help the transaction go smoothly.

For example, if the seller is still paying off the loan on their vehicle, the buyer’s private party auto lender will ask for the seller’s lender statement showing the payoff amount and payoff authorization. Your private party auto lender will then send funds directly to the lender to pay off the loan so the car’s title can be transferred. They’ll also send the seller any proceeds beyond what’s required to pay off the loan.

Some private party lenders also handle the ownership transfer paperwork with the DMV so you don’t have to. But you’ll still need to find out the car’s history before you buy it and find the best car insurance as soon as possible.

How a Private Party Auto Loan Works

Just like traditional auto loans, the vehicle you’re financing will secure the private party auto loan. While secured loans tend to have lower interest rates than unsecured loans, the lender can repossess your collateral (the car) if you fall behind on payments or default.

Lenders offer terms of 12 to 84 months on private party auto loans. The longer the loan term, the more interest you’ll pay but the smaller your auto loan monthly payment will be.

Rates and Costs

These are the factors that will affect your interest rate on a private party auto loan:

• Your credit score. The higher your credit score, the lower your rate.
• The amount you’re borrowing. Smaller loans sometimes have higher rates than larger loans.
• The loan term. Shorter terms, like a 24-month auto loan, tend to have lower rates than longer terms, like 84 months.
• The vehicle’s age. Newer vehicles tend to have lower rates than older ones.
• The vehicle’s mileage. Cars with more miles may entail higher-rate loans.
• The lender you choose. Shopping around will help you get the best deal.
• Autopay discount. Rates are often 0.25% to 0.50% lower for customers that allow automatic monthly drafts from their bank account to repay the loan.

How Can I Qualify for a Private Party Auto Loan?

Qualifying for a private party auto loan is just like qualifying for a dealership auto loan. You’ll need good credit and enough income to cover your monthly payment. You might need a down payment, but many lenders offer 100% financing on used auto loans. They may even finance more than 100% of the car’s purchase price to help you cover tax, title and license fees.

The average credit score for someone purchasing a used car with an auto loan in the fourth quarter of 2020 was 671, according to Experian. You are unlikely to qualify for an auto loan with a credit score below 500, but there are lenders that specialize in car loans for bad credit.

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How Do I Find a Private Party Auto Loan?

When you buy a car from a dealership, they’ll connect you with their preferred lender. Think Honda Financial Services, Toyota Financial Services or Ford Credit. You can also provide your own financing from a bank, credit union or online lender, and sometimes you’ll save money that way.

Private party auto loans also come from banks, credit unions and online lenders. But they’re harder to find than a new or used auto loan for a dealership purchase.

To help you get started, here are a few financial institutions that offer private party auto loans as of May 2021:

• Large banks. PNC, Bank of America and Regions Bank
• Credit unions. Members 1st in Redding, Calif., Credit Union West, Logix and First Credit Union
• Online lenders. LightStream and MyAutoLoan.com
• Community banks. These don’t always have the greatest online presence, so check your local area and make some phone calls to see what’s available.

It also doesn’t hurt to check with any bank or credit union you already have a relationship with.

If the car you want to buy is too old, has too many miles, isn’t worth enough, is a commercial vehicle or has a salvage title, you may have trouble finding a private party auto loan. A personal loan can provide financing in these situations. However, most personal loans are unsecured, meaning you can expect to pay a higher interest rate than you would on an auto loan, which is secured.

Here’s an example of how much you’ll pay on a typical loan with terms of 72 months.

Private Party Auto Loan Vs. Personal Loan

Private Party Auto Loan Vs. Other Auto Loans

A private party auto loan may have a higher interest rate than other auto loans. Here’s a comparison showing how your total loan cost might compare on two options: a private party auto loan on a less expensive car and a used-car auto loan on the same make and model at the dealer’s higher price. For this example, we will evaluate a 2016 Honda Civic LX Sedan with 50,000 miles.

If you make a simple spreadsheet comparing your real-life offers and options, you’ll see which choices offer the best value. There are times when buying a new car is actually the way to go because of dealer sales and 0% financing. And, of course, you can also play with the loan term to get a monthly payment and total finance charge that you can live with.

Compare Rates and Save on Your Auto Loan

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