Are private-party car loans always more expensive than dealership loans?

"I got pre-approved for a 36-month loan at 3.9%. But when I went to the bank to get the cashier's check, they told me that because I'm not buying from a dealer, my interest rate would change.

With a credit score of 680, they told me that they could give me a loan to buy from a private seller, but the rate would be 16.5%. To me, this seems ridiculous."

Answer
“The risk of buying from a private seller is higher in the eyes of the lender, and that’s why 99% of private-seller car loans have a higher interest rate.
In your case, the jump from 3.9% to 16.5% seems to be a bit much. The question you have to ask is whether they’re giving you a car loan or a personal loan.
If your lender didn’t ask you for the vehicle identification number (VIN), proof of insurance, or the title, chances are that they gave you a personal loan, which would explain the high interest rate.
Before you sign for this loan, go back and ask what type of loan it is. If it’s not a car loan, ask them if you can apply for one. If not, you should definitely look elsewhere, as you can almost certainly find a better rate, even with your credit score.”
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Eric Schad
Answered on Jun 02, 2021
Eric Schad has been a freelance writer for nearly a decade, as well as an SEO specialist and editor for the past five years. Before getting behind the keyboard, he worked in the finance and music industries (the perfect combo). With a wide array of professional and personal experiences, he’s developed a knack for tone and branding across many different verticals. Away from the computer, Schad is a blues guitar shredder, crazed sports fan, and always down for a spontaneous trip anywhere around the globe.
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