Private Auto Loans - What you need to Know
With person-to-person auto loans one simply buys from a private party instead of a dealership or a car company. There are many people under the impression that buying a used car directly from an owner will get them a much better deal than they would from a car dealership. This is especially true in cases where the car owner and the car history are well known to the buyer. It eliminates the possibility of hidden surprises springing up along the way. On the whole, these auto loans have a lot in common with other methods of buying cars. However there are also certain differences that can be important concerning private auto loans.Higher rates as compared to buying a new car: When it comes to any used car, the rates for person-to-person or private auto loans invariably prove to be more than those for a new car. To take an example, rates for private party sale auto loans from online auto loans lender will usually be higher by about two points compared to what is charged for traditional new auto loans and about one and a half points higher than the interest rate being charged for used car loans for vehicles purchased from dealers. Another difference is that this type of loan is based more on you than the collateral or the car. Due to this rates fluctuate according to your credit history and other aspects concerning your loan application.
Loan term may be less than that of a new car. The standard duration for financing a new car can be up to seventy-two months. In the case of private auto loans, it may not be possible to finance a vehicle for the same duration. Usually lenders are ready to finance private auto loans for at most forty-eight months, though there may be exceptions when they have been known to finance for periods longer than that. However, it is important that auto loans finance is done for as short a period of time as you can possibly afford. This is to ensure that you don’t end up in a situation where you owe more on the car than its value (upside down car loan) and to minimize the amount of interest you are required to pay.
With many lenders a down payment may not be required for person-to-person auto loans. Despite not being required, it is better to put money down. Doing this will reduce your chances of being upside down in your car loan in the future. Taxes, title and registration have to be paid separately when you purchase a new car from a dealership. The dealer normally combines taxes, title and registration fees into the loan amount. For private auto loans, the lender will not allow you to finance the fees and will require you to pay for them out of your pocket.
On purchasing a new vehicle, the title is put in your name almost immediately. When it comes to person-to-person or private auto loans, it could take longer. The owner of the car you are buying from may still owe money on the car and it could take a week or longer for completing the payoff process. His lender needs to receive the payoff amount before he transfers the title to the car owner and then it can be turned over to you. The duration of this process is mainly based on the location of the lender. In case of the local bank, this process should not take more than a few days. However if the lender happens to be in another state, it could take much longer for the transfer to be done.
To briefly sum it up, private auto loans make a good option if you are a creditworthy borrower. However id your credit happens to be less than perfect, it may be better to turn to your local dealership as the best source for an auto loan.
THIS CONTENT IS FOR INFORMATIONAL PURPOSES ONLY. THIS IS IN NO WAY GIVING ANY LEGAL ADVICE OR REPRESENTATION. THE INFORMATION CONTAINED HEREIN WAS COMPILED FROM VARIOUS ARTICLES. FOR ANY LEGAL ADVICE OR REPRESENTATION SEEK YOUR OWN LEGAL COUNSEL.