Glossary: Car Loans and other...

Acceleration Clause

If you default on a loan this clause allows the lender to speed up the rate in which the loan is paid off. This can include an entire balance to be paid off immediately.

Agreement of Sale

Otherwise known as a sales or purchase agreement, this agreement basically states that the seller is selling and the buyer is buying under a specified set of terms. Both parties would then sign the contract.

Amortization

Calculates the loan payment including interest on the outstanding balance to be paid off at the end of a fixed period.

Annual Percentage Rate (APR)

Often confused with interest rate, an APR supplies the cost of credit over the course of a year. It is supplied as a percentage taking into consideration the amount finance, any charges, and the term of the loan.

Appraisal

An estimate of the value of property, made by a professional appraiser.

Appraisal Fee

A service fee for estimating the value of property.

Asset

Property that can be used to repay debt, such as stocks, bonds, cars or a house.

Automated Teller Machines (ATMs)

Essentially computer terminals in which customers can withdrawal, deposit, or received balance statements of their bank accounts or credit cards.

Billing Error

Any mistake in your monthly statement as defined by the Fair Credit Billing Act.

Broker

A person who assists a client in negotiating contracts or assisting in the arrangement of funding, but does not loan the money themselves.

Business Days

The period of time during a given work week that a company considers itself open, national holidays and weekends are usually not considered business days. Feel free to make an Inquiries at the company your working with to find out what days it counts as business days under the Truth in Lending and Electronic Fund Transfer Acts.

Certificate of Title

Is evidence of vehicle ownership issued by the Department of Motor Vehicles when it has confirmed said ownership. There is a fee to receive one based on state, taxes and other possible registration fees.

Closing

The meeting between the buyer, seller and lender where the property and funds legally change hands. Also called settlement.

Cloud (On Title)

An outstanding claim which negatively affects the marketability of title.

Collateral

Property offered to support a loan that can be seized if you default on your payments. Car and/or a house would be a good example.

Commission

When a real estate agent or broker finds and completes a sale, that individual is paid money by the seller for those services rendered.

Commitment

An agreement, often in writing, between a lender and a borrower to loan money at a future date subject to the stated conditions.

Cosigner

Another person who signs your loan and assumes equal responsibility for it. This usually comes into play when the original person applying for the loan does not have enough credit to take on the responsibility themselves.

Credit

Reputation for solvency and integrity entitling a person to be trusted in buying goods or borrowing money.

Credit Bureau

An agency that keeps your credit record.

Credit Card

A card used from time to time to borrow money or buy goods or services on credit. Visa, MasterCard, American Express and Discover are just some examples.

Credit Scoring System

A statistical system used to rate credit applicants according to various characteristics relevant to creditworthiness.

Creditor

A lender to whom money is owed.

Creditworthiness

Past and future ability to repay debts.

Debit Card (EFT Card)

A card that looks fairly identical to a credit card, that an individual can use to make purchases and other electronic transactions. The advantage of this card is that you are not adding to your debt, just withdrawing money from you bank account.

Default

Failure to repay a loan or otherwise meet the terms of your credit agreement.

Delinquency

Failure to make payments on time.

Disclosures

Information about a vehicles history that is given to the consumer, such as accidents or repairs that has been done to the car.

Down Payment

The amount of money that is initially deposited to lower the amount financed.

Earnest Money

Money given by a buyer to a seller as part of the purchase price to bind a transaction or assure payment.

Elderly Applicant

As defined in theEqual Credit Opportunity Act, a person 62 or older.

Electronic Fund Transfer (EFT) Systems

A technology for transferring funds electronically rather than by check.

Equal Credit Opportunity Act (ECOA)

Is a federal law that requires lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status or receipt of income from public assistance programs.

Equity

The residual value of a business or property beyond any mortgage thereon and liability therein.

Finance Charge

The total dollar amount credit will cost.

General Warranty Deed

A deed which conveys not only all the grantor's interests in and title to the property to the grantee, but also warrants that if the title is defective or has a "cloud" on it (such as mortgage claims, tax liens, title claims, judgments, or mechanic's liens against it) the grantee may hold the grantor liable.

Gross Monthly Income

The total amount the borrower earns per month, before any expenses are deducted (such as taxes or 401k plan).

Guarantee

A promise by one party to pay a debt or perform an obligation contracted by another if the original party fails to pay or perform according to a contract.

Hazard Insurance

A form of insurance in which the insurance company protects the insured from specified losses, such as fire, windstorm and the like.

Impound

That portion of a borrower's monthly payments held by the lender or service to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due. Also known as reserves.

Index

A published interest rate against which lenders measure the difference between the current interest rate on an adjustable rate mortgage and that earned by other investments (such as one- three-, and five-year U.S. Treasury Security yields, the monthly average interest rate on loans closed by savings and loan institutions, and the monthly average Costs-of-Funds incurred by savings and loans), which is then used to adjust the interest rate on an adjustable mortgage up or down.

Interest

A charge by the lender, expressed as a percentage of the total amount leant. The borrower pays this charge as payment for the loan.

Interest Rate

Expressed as a percentage of 100, the annual rate of interest on a loan.

Joint Account

An account with a financial institution, such as a bank, in which two or more people share the account. All parties involved share legal responsibility to repay loans or debts of this account.

Lessee

The person who signs a lead to have temporary use of a vehicle.

Lessor

The company that provides temporary use of a vehicle in return for periodic payment.

MSRP

Manufacturer's Suggested Retail Price. This is the recommended selling price for a vehicle, set by the manufacturer. Options added or removed from a vehicle effect this price.

Net Effective Income

The gross income of the borrower, minus the percentage removed for federal and/or state income tax.

Point-of-Sale (POS)

The physical location at which a purchase is made by the consumer. Additionally, a method a taking electronic payment from a consumer without the need for a traditional check.

Prepayment Penalty

A bank imposed fee for early payment of a loan. This penalty is meant to protect the bank from lost income not generated from interest on the loan.

Rate

See Interest Rate

Refinancing

To provide new financing for an existing loan. The existing loan is paid with the Proceeds from the new loan. Typically the new loan is at a lower rate, or has a longer term than the previous loan.

Service Charge

Additionally charges based upon the completion of the defined service. May encompass a number of different charges. Services charges may relate to the financial aspects of processing a loan. A Dealer service charge may include preparation of the vehicle for delivery.

Tax

Based upon the cost of the vehicle. Contributed to the government for continuation of services. Amount varies from state to state. Some states also place additional taxes on certain types of vehicles. i.e. Luxury tax for cars over a set value, "Gas Guzzler" tax for larger vehicles and SUV's.

Term

For a loan this is the period of time between the beginning of the loan and the end date, at which time the balance of the loan would be due.

Title

A legal document that proves an individual’s ownership of property.

Title Insurance

Usually issued by a Title Insurance company, protects a homeowner from errors made during a title search. Determined by the value of the property being sold, the cost may be shared between the purchaser and the seller.

Title Search

Best performed by a title company, this is thorough examination of municipal and public records to determine legal ownership of property.

Trustee

A person whom is legally entrusted with property for the benefit of another individual or individuals. Additionally to place a debtor’s wages, credits, or property in the hands of a third party, in the interest of the creditor.

Verification of Employment

Written verification of your employment. Sent by your current employer, this may include your salary information, and your job description.

Latest News