What you need to know about personal contract purchase

Personal contract purchase allows an individual to purchase a vehicle from another individual and instead of paying for the vehicle’s selling price the buyer pays monthly payments on the seller. The payments are made until the loan balance is totally paid off. This can be a good option if you have a bad loan experience from the past and you want to purchase a used car. However, this type of financing needs to be conducted with utmost care. This article explains some of the important facts involved in personal contract purchase that could help you gain the benefits from it and reduce the risks involved.

1. Personal contract purchase involves greater amount of trust

Compared to traditional loan arrangements, personal contract purchase requires greater amount of trust between the seller and the lender. They need to come-up with the needed understanding in order to avoid disputes that might lead to legal battles. This could force the seller and the buyer to file charges against each other on small claims court or superior civil courts.

In order to avoid this, the seller and the buyer need to create a contract that incorporates the terms and agreements involved. The contract should also include the ways on how to deal with possible events that might lead to further disagreements.

2. Personal contract purchase involves a negotiated interest rate

The interest rate involved in a personal contract purchase is different from the interest placed o loans offered by banks or credit unions. Since this is a personal contract, the seller could place a specific interest rate to the contract and this could be higher or lower compared to the interest rates of traditional loans. In this type of contract, the buyer could negotiate with the seller for possible reduction of the rates involved.

In case they are not able to come up with an agreement, each party has the right not to pursue the sale. However, when you are really interested on purchasing the car that the seller offer, you can find a close friend or relative that would purchase the car in cash. In return, you would pay the monthly payments to your friend or relative who purchased the car in your behalf.

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