Car Loan Glossary
Have you ever heard a word or terminology having to do with car title loans or auto refinancing and had to stop to check the dictionary for the meaning of the word or phrase? You’d agree that the regular dictionary does not always have the answers you need. Therefore, you need Car Loans of America’s Car Loan Glossary!
That problem is a thing of the past! This article has gathered the A – Z (literally from A to Z) of car loan terminologies and has presented it to you in the form of a car loan glossary. Everything you might need to know about or understand at any point in time with regard to car loans can now be found in a single article. A car loan glossary is essential to securing a loan.
Car Loans of America has put this car loan glossary together to help you better understand the professional jargons that you would most likely come across when dealing with auto refinancing and getting an auto loan. Let’s dive deep into our car loan glossary …
Auto Equity Loan:
Firs in our car loan glossary, this is a loaning system that puts to use the current equity available on your car or vehicle in exchange for the title of said car or vehicle. It could also be referred to as a title loan.
So in essence, you drop your car title with the lender while receiving a loan; then upon the full repayment of the collected loan, the title is returned to you.
Bad credit or poor credit refers to a description of an individuals credit score which lingers around 600. Any score from 300 to 630 could be considered as bad or poor credit according to a lot of sources.
These sources include Investopedia, National Credit Reporting Association, Credit.com and many more.
Generally, the FICO score (which ranges from 300 to 850) is being used by many loaning industries to determine whether or not a borrower is fit enough to take out a loan. Outstanding debts and late payments could contribute to giving an individual bad credit.
But at Car Loans of America, it is not the only criteria we take into consideration when deliberating whether or not to give out a loan to an individual.
Bad Credit Car Loans
A bad credit car loan is also known as a bad credit auto loan. These are secured loans which mean they are tied to collateral – in this case, it would be the car. If you don’t pay your bad credit car loan, the auto lender can repossess your car.
A balloon payment is a system of payment where the loan is paid off in little sums (at times the interest ONLY) initially, but one final but considerably large sum (which could be the principal only or could contain some amount from interest) is to be paid before the end of the agreed time.
This is unlike amortizing loans where the loan is paid off making use of time-to-time payment of both interest and principal which enable the borrower to pay off the debt gradually.
Bill of Sale:
A bill of sale is a document that is used to record the details of a specific transaction and is prepared by the seller. In this case, it is prepared by the dealership to record the details of the purchase of a vehicle by a customer. The amount involved and other financial terms involved in the transaction would be recorded in the bill of sale. Continue to read our car loan glossary …
A black book refers to a collection of information on various cars and their values based on the wholesale value of the car (as established at car auctions) as well as other data points and analysis of the current market (with relation to the car) by professionals.
The black book is used by the dealership and is constantly being updated in order to provide the most accurate pricing information on a vehicle at any given time. It is similar to the bluebook (which we will consider next).
The blue book is majorly used by customers, unlike the black book. It is thought to not be as accurate as of the black book concerning the value of a vehicle, but it gives a customer an idea of the value of his or her vehicle. The values here are based on Kelley Blue Book, Inc.
A buydown simply involves the payment of proposed discount points by the borrower to the lender in order to reduce the interest rates for the first few years. It might seem to be more expensive initially, but it is a bit cheaper in the long run. During the purchase of an already used or even a new vehicle, an offer to buydown the existing interest rates on car loans is proposed to the buyer.
Probably the most important definition in our car loan glossary: a car loan is also known as an auto loan. It’s a sum of money consumers borrow in order to purchase a vehicle.
Car Loans of America Dealers:
At Car Loans of America, there is an already built group of trusted and certified dealerships.
Cash Back Refi:
It is also known as cash-back auto refinancing. A cash-back refi refers to the use of the current equity on your vehicle to get cash in return. The vehicle would also be refinanced during the process. Cash-back refi is a type of refinance loan.
This process allows for the customers to source out a considerable amount of cash (up to as much as $5,000) from the equity of their vehicle. In most cases, the original terms agreed upon would be changed.
This is especially important when emergency situations arise; you want to pay down a higher interest debt, purchase a much-needed appliance at home or any other need you need to address.
Moreover, if you meet all the requirements, carrying out cash-back auto refinancing with Car Loans of America is fast, free and relatively straight forward.
Certificate of Title:
A certificate of title is proof of ownership. This is a document that is issued by the Department of Motor Vehicles (DMV) to an individual to prove his or her ownership of a registered vehicle.
A cosigner is an additional individual who signs or agrees to take responsibility for a loan should the original signer prove to be unable to pay. A cosigner in most cases has decent or acceptable credit. The cosigner has equal responsibility as the original or main signer.
Although the term “credit” has a lot of meaning in the business world, in this case, it refers to the credit history of a person. In some cases, it is used to evaluate whether a person is worthy of a loan or not by accessing his or her ability to repay the loan.
It is easy to guess from the name that a credit bureau is an agency that keeps track of a person’s credit history while compiling an accurate record.
A detailed record of an individual` financial dealings and relationships. The credit history is extremely important because it helps lenders realistically evaluate the individual` ability to repay loans.
Credit Scoring System:
A number that is used to predict how likely you are to pay back a loan on time, according to the Consumer Financial Protection Bureau (CFPB). In simple is a scoring system that is used to determine how creditworthy a person is. Hence, the higher the credit score, the more creditworthy a person is.
A creditor is a person or institute that finances a loan. Hence, they are being owed money due to the loan.
This refers to a persons ability to repay a loan in full and on time.
A dealership refers to a company that has been legally authorized to some certain brands of a vehicle from the vehicle manufacturer.
The debt-to-income ratio or DTI (for short) is a method of observation and comparison between the amount of money you owe other lenders and the amount of money you can make within a given time. This ratio shows the percentage a borrower`s debt can amount to when compared to the total income of the borrower.
Default happens when backing-out on an agreement occurs due to the inability or failure of a borrower to abide by all the terms originally agreed upon with the lender.
This could be defined as making payments on vehicle loans at a late date or after the date stated within the terms of the agreement.
The reduction in the original value of a vehicle due to the passage of time (age of vehicle), wear and tear.
This is a fee paid by the dealership to the manufacturers of a vehicle. The destination charge is paid to the manufacturers as they are responsible for shipping the vehicle to the location of the dealership. This charge is usually added to the base sticker price of a vehicle.
Including previous repairs or repairs or even title issues, disclosure refers to all information given to the customer with regard to a vehicle` history.
A down payment refers to a certain amount of money needed to reduce the amount of money originally financed on an auto loan. It is generally beneficial because it reduces finance and could even help you get a cheaper interest rate.
Electronic Fund Transfer Systems:
Also known as EFT systems, electronic fund transfer systems refer to the transfer of funds or money from one bank to another digitally or electronically.
Equal Credit Opportunity Act (ECOA):
The ECOA is a federal law that is in place to make sure that discrimination (on the grounds of religion, race, color, age, national origin, sex, receipt of income from any public assistance program or marital status) is not practiced by creditors and lenders alike.
This is to make sure that everyone meeting the right criteria as set by the government, has equal credit availability.
In the case that your vehicle is eventually discovered to be worth a price higher than what you actually owe, with reference to the funds you have already received, you could be said to have enjoyed positive equity in the car.
F & I Office:
In full, F & I Office refers to the Finance and Insurance Office. The Finance and Insurance Office is responsible for the filling out of appropriate contracts and paperwork related to an auto loan (at a dealership), by the customers.
This is an essential step before carrying out delivery on a previously used or even new vehicle.
Throughout the duration of an auto loan, the sum total of incurred interest charges is referred to as a finance charge.
This refers to a time period after the date originally agreed upon, during which the fact that you made late payments would incur no penalty in the way of additional fees.
Gross Monthly Income:
This refers to the total income an individual earns on a monthly basis before necessary payments such as insurance, income tax, and even child support are made.
Refers to the amount a lender would be expecting in return for providing a car loan to a borrower. This could also be referred to as finance charges. We are now halfway through our car loan glossary.
This is the rate incurred (by way of interest) annually as a result of an auto loan. This is usually expressed by way of percentage (%).
This is the price directly quoted for a car when it is being sold by the manufacturers themselves to the dealership.
When two persons share a single account, and both parties are equally responsible for the payment of a loan, that account could be said to be a joint account.
As long as the payment of a car loan is not completed on the agreed date or even before the date, the payment could be said to be a late one.
This is another method through which a vehicle can be financed. A lease refers to a situation where a person takes possession of a vehicle for a period of time.
But, even during this period the leasing, the company still retains ownership of the said vehicle.
A lessee is a person who according to a leasing agreement can make temporary use of the vehicle from the leasing company.
The lessor with reference to a leasing agreement is the company that hands over temporary usage of a specific vehicle to the lessee.
A lien is a situation where a finance company takes possession of a given vehicle due to debt. This possession lasts until such a time as when the debt has been fully repaid.
The list price could also be referred to as the sticker price or MSRP.
This is the retail price on a vehicle that is suggested by the manufacturer of the vehicle.
Known as LTV, it’s a system that uses ratios to display the relationship (in terms of percentage) between a loan amount and the value of the vehicle involved.
A mark-up is evaluated by subtracting the sales price of the dealer from the invoice price.
As the name implies, this is a sticker. It could be said to be a price sticker, and according to federal law, it is compulsory for all new vehicles.
It shows all options on a vehicle and the MSRP (manufacturer` suggested retail price).
Manufacturer` suggested retail price or MSRP for short, is the selling price of a vehicle as recommended by the manufacturers. This price fluctuates with the options available to the car.
This is the entire income of a borrower exempting the state and federal taxes.
Online Car Loan Application:
An online car loan application, or online auto loan application, is the ability to apply for an auto loan online.
This is done via application form provided by auto lenders. It eliminates the need to speak to someone immediately over the phone and information is submitted over a secure network. We are almost finished with our car loan glossary!
The vehicle title or certification.
Also known as PTI, this is a means of using a ratio to express the percentage of a person` income which will be required to complete an auto loan payment.
This is credit history which shows a score that is below average. It could be caused by bankruptcy, repossessions, late payments, and other factors.
Power of Attorney:
A document that legally allows one person to act as a representative of another person.
The original amount owed as a result of a loan excluding the interest.
Proof of Income:
This refers to documents that could serve as testaments to a person` income. An example is a bank statement.
Proof of Residence:
This refers to any legal document that could serve as proof of a person` residence. An example is a utility bill.
To finance something again, typically with a new loan at a lower rate of interest. Refinance is also known as a ‘Refi’.
Using a new lender to finance a previously existing car loan.
The need for repossession arises when a borrower decides not to repay a debt or defaults in doing so.
This charge encompasses the cost of delivery by the dealership and that of the finance company funding the loan.
This is the same as “List Price” earlier discussed.
“Stips” is short for stipulations. They include all documents that a lender would deem necessary in order to fund a loan.
Amount paid when purchasing a vehicle in order to abide by certain state or government tax requirements.
The entire amount of time involved in the repayment of a loan by a borrower.
Legal document serving as proof of ownership of a vehicle.
A system of loaning where the equity on your car is used to get you a sum of money in the form of a loan.
This refers to the value of a used vehicle traded in (as part of a purchase) to a dealership.
This is a requirement made as a result of federal law. It elicits total disclosure of annual percentage rates to borrowers when buying a vehicle.
This is when the current value of a vehicle is lower than the balance owed on it (the vehicle).
This is a law that states that lenders are not to exceed the maximum interest rate of the State while financing a loan.
Verification of Employment:
Verification of a person`s employment. The verification of employment can be written or oral. Learn more car loan glossary terms at http://car-loans-finance.angelfire.com/!
We hope you have enjoyed our car loan glossary!