A third-party loan is handled by an intermediary or middleman, and not directly by a lender. In the world of bad credit car loans, this is known as indirect lending and the dealership acts as the middleman. Let’s take a look at some common loan types, and clear up the confusion about third-party auto loans.
What Kind of Auto Loan Do You Need?
There are several types of loans that you may have heard of, such as third-party loans, direct loans, private party loans, indirect loans, and subprime loans. However, not all car loans aren’t created equal. No matter which type of auto loan you’re looking for, you need to know the differences so that you can get the right type of loan for your situation.
We often get questions about purchasing vehicles that are “for sale by owner.” These cars are referred to in many ways. Private party sales, vehicles from private sellers, buying from other people, and third-party cars are all commonly used phrases that we see. One of these, however, often gets confused.
The phrase "third-party vehicle" or "third-party auto" isn’t the same thing as a third-party loan, and it’s important to know the difference. Let’s take a look:
- Third-party loan: These loans are indirect loans from a third party, and shouldn’t be confused with loans for third-party cars.
- Indirect loans: These are loans that you get from a third-party lender, also known as an indirect lender. When you get an indirect, third-party loan, you’re working through an intermediary, typically a dealer, instead of directly with a lender.
- Direct loans: These are loans that you get directly from the lender, typically from a bank, credit union, or online lender.
- Private party loans: These are loans you get to purchase a vehicle from an individual rather than a dealership. These are usually direct loans from a bank or credit union, and sometimes people ask for a loan on a “third-party auto.”
Getting the Right Type of Car Loan with Bad Credit
When you have bad credit – a credit score of 660 or below – you’re most likely going to need a subprime loan. Subprime loans are, not surprisingly, provided by subprime lenders.
These lenders are only indirect lenders that work through special finance dealers. Because of this, they can’t provide loans for cars listed by private sellers, and any vehicle you get with this third-party loan must come from the dealership's lot.
Having poor credit doesn’t prevent you from getting a private party auto loan from a direct lender, but it does make it more difficult. Direct lenders typically work with people who have good credit.
In some cases, you may be able to get one of these loans to purchase the car of your choice from a bank or credit union. This is especially true if you have an account in good standing with the lender.
Finding a Third-Party Auto Loan
Now that you know third-party loans are what you need with bad credit, where do you find a lender? We mentioned that these lenders are only found at special finance dealers, but where do you find those?
You’re in luck, because at Auto Credit Express, we work with a large network of special finance dealerships across the country, and we want to help you find one in your area.
The process of getting your next auto loan is easy to get started. Simply fill out our easy, no-obligation car loan request form, and we’ll work to match you with a local dealer!