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Private Party Auto Loan

An excellent alternative to commercial auto loans is a private party auto loan. A private party auto loan is exactly what it sounds like; an individual advances money to another person for the purchase of a car.

There are several reasons why a person may seek private party auto loan. A friend or relative could be more likely to make an auto loan to a person with bad credit or low income. Individuals such as students, members of the military, the retired and others will be more likely to get a private party auto loan.

A private party auto will often have a lower interest rate and better terms than a commercial auto loan. A big advantage to a private party auto loan is that a person can get one without a credit check or a lot of paper work.

Making or Getting a Private Party Auto Loan

The first thing to remember about a private party auto loan is to borrow the money from a person who can afford it. If you go to a friend or relative for a private party auto loan make sure they can afford to loose the money if you can’t pay the loan.

Never make a private party auto loan to an individual if you don’t think they can pay the loan off. Only make a private party auto loan if you know the borrower can pay the loan off.

Another good rule is don’t make private party auto loans to individuals you don’t know. Never loan money to a person you don’t know and don’t borrow money from an individual you don’t know.

A stranger who is willing to loan you money is likely to be a criminal called a loan shark. Always avoid loan sharks because they have been known to employ armed thugs with baseball bats to ensure repayment.

Rules of a Private Party Auto Loan

When you enter into a private party auto loan always create a written agreement between the borrower and the lender. This agreement should outline the terms of the loan and the amount of interest to be charged.

A written agreement is necessary so there won’t be any conflicts over payment or the loans. Both parties should know how much the loan is and how much should be paid. This way both individuals know what is expected of them.

The written agreement should be simple and easy to understand. Each party should have a copy of the private party auto loan agreement.

Potential Illegal Entanglements

It is a good idea to check with a lawyer or other legal expert before entering into a private party loan. You should do this because lending laws in some states are strict and it is easy to run afoul of them.

In many areas the amount of interest that can be charged and repayment agreements are strictly regulated by law. Learning what the law says can help you avoid breaking the law and getting into legal trouble.

In particular you should realize that a private party auto loan agreement may not be legally enforceable if not written correctly. If the agreement is not legally enforceable, there could be no way to collect repayment if the borrower refuses to repay.