Private Party Auto Loans With Bad Credit

Private party auto loans are one option for auto purchase financing. Private party loans often require thorough documentation, but may be a more available and reasonable option for individuals with less-than-perfect credit history.

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A private party loan is a car purchase loan for a new or used car that is obtained through a financial source other than a car dealership. In many cases, the lender is a bank, credit union or even an online lender.

Before you apply for a private party loan, it is a good idea to obtain a current copy of your credit report, gather all of your supporting documents and price the type of car you want to purchase. You will need to provide all of this information with your application. If you have any doubts about your credit report, you will be better prepared if you have seen a recent copy and know your credit score in advance of applying for a loan.

The advantageous thing about private party loans is that they usually do not require borrowers to have perfect credit. Very often, individuals with credit scores between 620 and 700 find they can obtain a private party loan without any problem.

For borrowers who have credit scores that do not meet the minimum requirements of a lender, one way to encourage circumstances more favorably in their direction is to make a larger down payment, which reduces the purchase price and lowers the amount of money needed for the loan.

Several other factors also come into play with a private party loan. These include providing documentation for income, employment and residency.

Income - In many cases, lenders have minimum income requirements for car loans. Some lenders require an income of no lower than $1,500 to $1,800. However, in some cases, a lender may have higher income requirements, particularly if a borrower has poor credit history. Income documentation can take the form of providing copies of income tax reports, paychecks, pay stubs or bank deposit statements.

Employment - Most lenders require at least six months of recent employment history in order to approve an auto loan. However, if an applicant has a significant employment history, shorter periods of recent employment may be acceptable. Applicants can provide proof of employment with paycheck stubs or by a letter from their current employer.

Residency - Residency documentation can be provided with a copy of a current drivers license that shows a current address or by submitting copies of utility or other bills that show a current address. Most lenders prefer that applicants have at least a number of years residence at their current address and prefer that at least one residence over the past two years have lasted for at least 12 months.

If an applicant has a bankruptcy in their past, lenders prefer that it have taken place a minimum of two years in the past and that the applicant demonstrate good credit history for the most recent two years. Also, lenders usually ask that a copy of the bankruptcy discharge be submitted, particularly if items that were supposed to be included in the discharge appear on the credit report.

Private party loans are a car purchase loan that usually have less stringent credit requirements than a loan obtained through a dealership. Before applying for this type of loan, gather all of your supporting information, including documents you might need to submit with your loan application.