How to get a private car loan with bad credit

If you have bad credit, it may not be possible to get a private car loan. Most lenders who offer auto loans to individuals are direct lenders who generally do not fund borrowers with poor credit.

How to get a private car loan

Private auto loans allow car buyers to finance vehicles purchased from an individual rather than a dealership. Private auto loans are available from many financial institutions, such as banks, credit unions, and other online lenders. You can even get quotes from multiple lenders to buy the best terms.

Borrowers can directly apply for an auto loan from these lenders and, if approved, can deal directly with a private party. You can get a check from the lender to give to the private seller, and they will transfer title to the vehicle to you, with the lender as the secured party.

Many car buyers like to go the private sale route in an attempt to find a better deal on a used car. Others shy away from private sales because of the added legwork of arranging meetings and dealing with paperwork — things unnecessary when getting a loan through a dealership.

Borrowers with bad credit may need to avoid private sales for an entirely different reason.

Get a private car loan with bad credit

The lenders who fund personal auto loans tend to be direct lenders. Typically, most direct lenders generally only approve loans to borrowers with good credit, making it difficult for car buyers with bad credit to get approved.

Borrowers with poor credit who need an auto loan usually need financing through a subprime lender. These lenders are willing to help car buyers with bad credit, but they are normally indirect lenders that you cannot approach directly. Instead, they work through authorized car dealers who help them in two main ways:

  • Verify borrower information – The dealer works as an agent for the lender. Dealerships verify all of a borrower’s information on their application. By double-checking income, employment and residency details, lenders ensure that a borrower can afford a loan, which helps offset the additional risk associated with bad credit. Dealerships also collect documents required by lenders that serve as proof of borrower information.
  • Check vehicle information – Dealerships also help lenders by ensuring that all information about the financed vehicle is accurate. This includes its year, make, model, mileage and equipment. Subprime lenders will not finance cars with branded, salvage, or rebuild titles, so a dealer also makes sure the title is clean.

Subprime lenders won’t fund private auto loans, largely because private sales lack these two essentials. Dealerships act as a third party to reduce risk, making it an important part of the bad credit car loan process.

Get a car loan with bad credit

If you have bad credit and want a private auto loan, your best bet is to apply to your bank or credit union if you have a long-standing relationship with them. Ultimately, you’ll likely have to go through a dealer who has signed up with subprime lenders.

Auto Express Credit helps car buyers with bad credit find these dealerships. We work with a nationwide network of specialist finance brokers who know how to handle unique credit situations. We will endeavor to connect you with a dealership in your area if you start the process by submitting our free and secure car loan application form online.

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