Need Help With a Private Party Used Car Loan

by Maria
(Los Angeles, CA)

Question: I want to purchase a used car from a private party for $16,000 and need help with a private party used car loan.

I have limited credit and have been denied loans. I have a co-signer (who lives in another state). Banks denied because of my limited credit and a Credit Union required the co-signer to sign in-person (not in another state).

What would my best options be here? What banks/institutions would you recommend? They have to be present in both CA and NY.



Answer: Hi Maria,

There are a lot of variables that come into play with the situation that you are in and it's hard for me to be exact without knowing all the details, but I'll try to give you some suggestions that may help.

I'll phrase each one of these as questions, not so much looking for a response, but as a way for you to ask yourself if this, that or the other may be possible...

1. Can your cosigner use a credit union in their state that may not have the same restrictions?
   
   
2. Can your cosigner buy the car for you?
   
   If they can/will, this may allow you some time to build up some more credit and/or save up more down payment to refinance the loan into your name at a later date?
   
   
3. What other credit unions in your area (should be quite a few in LA) may not have the in state, sign in person restriction?
   
   You won't necessarily need to apply for loans through a bunch, but simply call and inquire about your situation and their loan program.
   
   
4. Do you have any means of getting/borrowing a larger down payment?
   
   Credit unions and banks in general appreciate larger down payments as it lessens their risk.
   
   
5. Is the vehicle itself hurting your approval or is it strictly a limited credit issue?
   
   Most lenders will restrict the types of vehicles they loan money on and don't like high mile older >> vehicles. If this applies
   to you, then you may need to simply look at something a little newer with less miles.
   
   
6. Are you trying to borrow too much money in relation to your gross monthly income?
   
   Depending on the final interest rate a $16,000 auto loan will roughly land your payments in the $350 to $425 range and if you're not making at least $2000 to $2500 (I stress at least...), then most lenders won't consider you for a first time auto loan.
   
   
7. Is your cosigner a problem or a solution?
   
   Sometimes people will have credit, but it's not as good as they think. In addition, if your cosigner currently has an open auto loan lenders may hesitate to authorize them for a second.
   
   I know the loan is for you, but the lender wants to know if you were to stop making payments could your cosigner easily make them for you.
   

Some possible solutions:

You can also take a look at Capital One (may not work, but worth a look), Chase, Wells Fargo and LA Financial Credit Union. I'm personally a member of LA Financial and they are based out of Pasadena, CA. I used to work with them a lot, but they've stopped offering indirect lending (no affect on your situation) and they may be able to help.

The only problem I see with LA Financial is that they may not be open to the out of state cosigner, because many credit unions require that you live, work or worship within certain zip codes in order to qualify for membership.

Lastly, take a look at this Credit Union Locator to try and find additional CU's in your area. This may take some work and many phone calls on your part to find a lender that can help, but it's worth a shot if you really want this vehicle.

Hope this helps you get your private party used car loan. If you have any further questions please don't hesitate to ask. Justin