Can I Get a Car Loan for a Private Sale?

Car loans for private sales

Charles Krome · May 23, 2024

Can I Get a Car Loan for a Private Sale?

Financing a car purchase—whether for a used vehicle or a new one—has become a routine part of daily life for many people. It almost has to be since the cost of even a typical pre-owned vehicle can be tens of thousands of dollars, and not many folks have that much cash lying around. The good news is that getting a used car loan for a private sale can be almost as easy as getting one for a dealership transaction.

Where Can I Get a Car Loan for a Private Sale?

The best place to start looking for a car loan for a private sale is your own bank or credit union. But the best way to save money is to shop around afterward. Now, this can sometimes be tricky, since some banks/credit unions only offer loans to members and others may charge non-members higher rates that are harder to qualify for. And it’s a good idea to avoid certain kinds of lenders when possible.

For example, borrowing from a credit card advance, payday loan, or a home equity loan – or a home equity loan line of credit (HELOC) – may seem like a quick way to access cash. However, each has its own notable pitfalls. Payday loans and credit card advances often charge sky-high interest rates, and using your home as equity could put you at risk of foreclosure if you can’t make your loan payments.

One solution is to try an online loan source like MyAutoLoan, which gets you loan offers from up to four different lenders including banks, dealerships, and loan companies, and LightStream, which specializes in affordable personal loans. (Note: HMSMC does not endorse these or any other outside sources, which are provided for informational purposes only. Applying for a car loan can affect your credit score.)

Does Applying for a Used Car Loan Hurt My Credit?

Unfortunately, due to the way credit companies operate, applying for a used car loan will cause most people’s credit scores to fall by some 5 to 10 points. This actually happens when anyone does a “hard” check on your credit, which is necessary for typical loans of all kinds. Keep that in mind if you’re shopping around for loans. In that situation, you want to be clear with the lender that you’re first interested in getting pre-qualified for a loan – with a “soft” credit check – not pre-approved. This won’t lock in your loan terms, but it can give you a rough idea of your monthly payments for comparison purposes. 

 On a more positive note, making loan payments on a regular basis is a proven way of increasing one’s credit score. 

Are Car Loans for Private Sales More Expensive?

All other things being equal, loans are usually less expensive when financed with an outside lender than with a dealership. That’s because a dealership will generally act as a middleman in a loan transaction, making extra profit by adding its own charges, usually in the form of a higher interest rate, on top of the money being collected by the actual lender. Because there are no dealerships involved in a private sale, there are no middleman costs to worry about.


Now that you know more about auto loans for private sales, you can start shopping here, start selling here, and enjoy the whole HMSMC site from wherever you have an Internet connection.

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