Auto loans are available through both car dealerships and private parties, though getting a loan through a private party may take a bit more legwork.
While private party auto loans tend to have higher interest rates than their dealership counterparts, private party auto sales often occur at lower overall price tags, and the trade-off might be worth it for you.
Here’s what you need to know about private party auto loans, including where you can find them, their typical rates and terms, and how you can apply for one.
Key Points
• A private party auto loan finances used car purchases from individuals.
• Pros include lower interest rates and potential bargains.
• Cons are higher rates and lack of dealer assistance.
• Interest rates vary based on credit, income, and vehicle condition.
• Alternatives for bad credit include borrowing from friends, family, or personal loans.
Private Party Auto Loan Defined
A private party auto loan is when a bank or financial institution lends a car buyer money to purchase a used vehicle off the private market. A borrower might use a private party auto loan to buy a car from a person they found on Craigslist or from a friend who’s looking to sell their car.
Like most vehicular loans, a private party car loan is generally a secured loan — and the collateral for this auto loan is the car you’re purchasing. That means if you default on your payments, the lender can repossess your car.
Private party auto loans charge interest as an annual percentage rate, or APR, which can add up over the term, or length, of the loan. Loan terms may be anywhere from 12 to 84 months long.
Keep in mind, though, that private party auto loans often come with higher interest rates than their dealership counterparts. These loans can also have eligibility limitations when it comes to the vehicles themselves — cars over a certain age or mileage may not qualify.
Where to Find a Private Party Auto Loan
Private party auto loans are available from a variety of financial institutions, including big, national banks as well as smaller regional credit unions and online lenders.
Because you’ll need to seek out the loan on your own, rather than simply allowing the dealership to work with whichever institution it uses in-house, you’ll have the opportunity to shop around for the loan with the most competitive rates and terms. When shopping for an auto loan, lenders may require that you find the vehicle you want to buy before applying for a private sale auto loan.
Private Party Auto Loans vs Typical Auto Loans
The table below compares private party auto loans vs. typical auto loans:
| Private Party Auto Loan | Typical Auto Loan |
|---|---|
| Provides borrowers with financing to buy a used car from a private seller | Provides borrowers with financing to buy a new or used car from a dealer |
| Borrowers may be required to find the car they want to buy before before applying for financing | Borrowers can get preapproved for financing before shopping for a new or used car |
| Financing may come from a bank, credit union, or nonbank financial institution | Financing may come from a bank, credit union, nonbank financial institution, or a dealership |
Factors Affecting the Interest Rate of a Private Auto Loan
As with other loans, there are a variety of factors that can affect the interest rate of your private party loan, such as:
• Your credit score
• Your income and employment history
• The age of the vehicle
• The mileage of the vehicle
• The length of the term
While private party auto loans do tend to have higher interest rates than the secured loans you’re likely to find at a dealership, they often have lower rates than personal loans, which are unsecured. So again, it’s all about weighing your options and deciding whether or not the option to finance a private-market vehicle is a worthy trade for you.
Recommended: Luxury Cars by Maintenance, Ranked
Pros and Cons of Private Party Auto Loans
Below, we highlight some of the pros and cons of getting a private sale auto loan:
Advantages of Private Party Auto Loans
• They provide would-be car buyers with private sale auto loan financing
• Can help you buy a used car at a bargain price
• Your interest rate may be lower than unsecured personal loan rates
• Can help you build credit
Disadvantages of Private Party Auto Loans
• Lenders may require that you find the car you want to buy before applying for the private sale auto loan
• Your interest rate may be higher than a typical auto loan
• An auto loan for private seller purchases cannot be used to buy a new car from a dealer
• The lender may not help you in the paperwork process of transferring the car title and registration into your name
How to Qualify for a Private Party Auto Loan
Like other loans, qualifying for a private party auto loan will depend on your financial factors, including your credit history, income, existing debts, and more. Lenders are trying to assess how much of a risk it is to put money into borrowers’ hands, and they use these indicators of past financial behavior in order to decide whether or not they think they’ll see the money back from you.
As usual, when it comes to private party auto loans, the higher your credit score and the lower your existing debt, the more likely you are to qualify for a loan with a lower interest rate. If you want to improve your odds of approval or secure a more competitive rate, there are steps you can take. For example, you could ensure that going forward, you make all payments in full and on time, as payment history is the biggest determinant of your score. You could also work on paying off debt to lower your credit utilization.
How to Apply for Private Party Auto Loans
To apply for a private party auto loan, you’ll need to supply the lender with your basic demographic information, including your:
• Name
• Date of birth
• Address
• Social Security number
The application will likely also ask about your employment history and income, as well as any current debts you pay (including your mortgage or lease payment).
Additionally, you’ll need some details about the car you’re interested in purchasing, too, including its:
• Make and model
• Year
• Mileage
• Vehicle identification number (VIN)
Depending on the lender, you may also be asked to provide:
• The bill of sale or buyer’s order detailing the terms of the purchase agreement
• A copy of the vehicle’s title and registration
• Written payoff quote from the seller’s lender, if the car is still under lien on their side
Should You Use a Private Party Auto Loan to Refinance Your Car?
Along with purchasing a car in the first place, you might be interested in finding a new loan to refinance a car you’ve already purchased. Auto loan refinancing may be right for you if you can secure a lower interest rate.
However, private party auto loans are specifically for private party sales and may not be helpful for those looking to refinance. Additionally, with their higher interest rates, they might not save you money in the long run — which is typically the main reason to refinance.
Recommended: Guide to RV Financing
Are There Private Party Auto Loans for Bad Credit?
If you have bad credit, you can still often get a car loan for a private sale. However, these borrowers may not qualify for a lender’s best rate of interest.
Deep subprime borrowers, for example, had an average auto loan rate of 21.58% on used vehicle financing in mid-2025 compared with 6.82% for superprime borrowers with excellent credit scores between 781 and 850, Experian® data show. This means that a person with any credit score can obtain used car loan financing, but the interest rates will vary tremendously.
Recommended: Auto Loan Refinance Calculator
Alternatives to Private Party Auto Loans
Here are some alternatives to private sale auto loan financing that you may consider:
• Indirect financing through a dealership
• Borrowing money from friends or family to buy a car
• Using a personal loan to buy a car
• Buying the vehicle outright with cash
• Getting a short-term car lease
Recommended: Refinancing Car Loans on Social Security Disability
The Takeaway
Private party auto loans make it possible to finance a vehicle purchased on the private market, but it’s important to understand that these loans do tend to have higher interest rates than their dealership counterparts. However, their interest rates are still usually lower than the rates on unsecured personal loans — so if you’re committed to buying on the private market, a private party auto loan may work for you.
If you’re seeking auto loan refinancing, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your car in minutes.
FAQ
Do you have to take out a private party auto loan if you are buying from a private seller?
No, you don’t have to take out a private party auto loan if you are buying from a private seller. Consumers with sufficient cash on hand can buy a vehicle from a private seller outright. Consumers can also take out a personal loan or borrow money from other sources to buy a car from a private seller.
How are private party auto loans different from other auto loans?
You cannot use a private party auto loan to buy a new car from a dealer, whereas other auto loans can help you buy new or used cars from a dealer. Private party auto loans also typically come with higher interest rates than loans you’d secure at the dealer.
How big can a private party auto loan be?
A private party auto loan can be equal to 100% of the vehicle’s sale price. If the private owner of a used luxury car sells the vehicle for $50,000, your private party auto loan could be up to $50,000 to buy the vehicle with 100% financing. Some lenders, however, may not be willing to offer 100% financing on a vehicle that may depreciate in value.
Can I get a car loan for a private sale?
Yes, you may get approved for a private party auto loan if you meet a lender’s underwriting standards. Borrowers with bad credit can get approved for private sale auto loan financing, but these borrowers most likely won’t qualify for a lender’s best rate of interest.
Photo credit: iStock/Wasan Tita
SoFi's marketplace is owned and operated by SoFi Lending Corp.
Advertising Disclosures: The preliminary options presented on this site are from lenders and providers that pay SoFi compensation for marketing their products and services. This affects whether a product or service is presented on this site. SoFi does not include all products and services in the market. All rates, terms, and conditions vary by provider. See SoFi Lending Corp. licensing information below.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
SOALR-Q325-099