A

Accrue
The process that involves interest accumulating on your auto loan.

Actual Cash Value
The market value of your car.

Adverse Action
The refusal to grant credit either in the amount or according to the terms requested by the applicant.  When adverse action is taken the consumer will receive an FCRA required Adverse Action notice explaining why credit was denied.

Amortization
The repayment of a loan or reduction of debt by installments with regular payments to cover the principal and interest.

Amortization Table
A table showing the amount of a principal and interest due at regular payment intervals and the corresponding unpaid balance of the loan after each payment.

Amortization Term
The amount of time required to amortize the loan. The amortization term is expressed as a number of months. For example, for a 3-year fixed-rate loan, the amortization term is 36 months.

Amount Financed
The total amount of credit provided by a lender or buy here / pay here car dealer.

Annual Percentage Rate (APR)
APR is a measure of the cost of a car loan. It is the yearly rate of interest including all fees and expenses paid to acquire the loan.

Application
The first step in the car loan process which involves gathering information  from the borrower.  This initial disclosure of  personal and financial information is required in order to evaluate the applicant’s creditworthiness.

Arrears
A payment made after the due date has passed.  A late car payment is one made in arrears.

Asset
Anything of monetary value that is owned by a person. Assets include real estate, personal property, and claims against others including bank accounts, mutual funds and stocks.

Auto Test Drive
A hands-on research tool in which the potential buyer drives the auto to test for overall handling, feel, and performance.

B

Bankrupt
A person, firm, or corporation that, through a court proceeding, is relieved from the payment of all debts after the surrender of all assets to a court-appointed trustee.

Bankruptcy
A proceeding in a federal court in which a debtor who owes more than his or her assets can relieve the debts by transferring his or her assets to a trustee.

Base Price
The cost of an auto before a franchised dealer adds options. Includes the standard equipment and the manufacturer’s warranty.

Basis Point
An interest rate or yield expressed as 1/100 of one percent.

Before-tax income
Income before taxes are deducted.

Beneficiary
The person designated to receive the income from a trust, estate, or a deed of trust.

Black Book
Refer to Book Value.

Book Value
The value of a used auto in a specific market area. A recognized wholesale appraisal guidebook provides guidance on the auto’s value at any given time. Examples of these guidebooks include Black Book, Kelley Blue Book, or NADA Guides.

Borrower
The person who obtains credit from a lender with the understanding that it will be repaid, with interest, within a clearly defined schedule. The individual responsible for paying back the loan.

Breach of Contract
A violation of any legal contract.

Broker
A person who, for a commission or a fee, brings parties together and assists in negotiating contracts between them for a fee.

Buyer
The person who buys the vehicle.

C

Cash Price
The price at which a seller offers to sell the property or service that is the subject of the transaction.

Certificate of Title
A document issued by a state to provide evidence of motor vehicle ownership and any lien holder’s security interest.

Clear Title
A title that is free of liens or legal questions as to ownership of the property.

Co-Buyer
An individual who purchases a car jointly with a buyer and is also liable for repayment of the loan. Co-buyers have ownership rights in the property purchased.

Co-Owner
A second owner of the car.

Co-Signer
A person who agrees to pay the monthly payments and to perform all the agreements stated on the contract if the buyer fails to meet contractual obligations.

Collateral
Property pledged as security for a loan to ensure repayment of a loan.

Collection
The efforts used to bring a delinquent account current and to file the necessary notices to proceed with foreclosure when necessary.

Collision Insurance
Insurance that provides coverage against the loss or damage to property arising out of the ownership or use of property. Collision coverage would cover any loss associated with a collision.

Comprehensive Insurance
A coverage, which pays for property loss, caused by force other than collision, such as fire, theft, vandalism, flood, hail and glass breakage.

Credit
Credit offered or extended to a consumer primarily for personal, family or household purposes.

Consumer Reporting Agency / Credit Bureau
Organizations or programs that collect individual credit information and provide credit reports to potential lenders and borrowers. Ex. TransUnion, Experian, Equifax etc.

Credit
An agreement in which a borrower receives something of value in exchange for a promise to repay the lender at a later date.

Creditor
A person or institution who extends credit and to whom the obligation is payable.

Credit Disability Insurance
An insurance policy that provides protection to the borrower in the event the borrower becomes medically disabled and is not capable of making their loan payment. The insurance company will make payments on a monthly basis according to the terms of the policy.

Credit History
The history of an individual’s debt repayment. For most types of loans, lenders use this information to gauge a potential borrower’s ability to repay a loan.

Credit Report
A report of an individual’s credit history prepared by a credit bureau and used by a lender in determining a loan applicant’s creditworthiness.

Credit Score
A numeric assessment used to evaluate the amount of “risk” involved in a credit transaction. It involves the evaluation of credit quality based on the information provided in the consumer’s application, the proposed loan structure and the consumer’s credit report. Ex. FICO Score.

Creditworthiness
A term used to describe the overall ability of a consumer’s abillity to borrow money.

D

Dealer Invoice
The amount the dealer pays the manufacturer for an auto.

Dealer Sticker Price
The total price of the auto. Dealer sticker price is also known as sticker price, or MSRP.

Default
Failure to comply with the terms of a loan contract. If a borrower defaults on a loan, the lender may seize the collateral, liquidate (sell) it, and apply proceeds to the loan balance.

Delinquent
The failure to make a loan payment on time.

Department of Motor Vehicles (DMV)
A state agency that oversees the process of registering, titling and licensing autos for a particular state. The Department of Motor Vehicles is also referred to as the Department of Transportation.

Department of Transportation
Refer to Department of Motor Vehicles.

Depreciation
A decline in the value of an auto (property) over time.

Destination Charge
The price added into the dealer invoice for moving the auto from the manufacturer to the dealer.

Direct Financing
A loan is originated directly between a lender and a consumer.  This kind of onsite financing is typically done by Buy Here, Pay Here car dealers.

Down Payment
The part of the purchase price that the buyer pays in cash and does not finance with a loan.

Due Date
The date in a given month that a loan payment is due.

Duplicate Title
The request by an applicant to reissue a Certificate of Title when the original has been lost or destroyed.

E

Equal Credit Opportunity Act (ECOA)
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.

Extended Warranty
A contract that covers specified breakdowns after a manufacturer’s warranty expires. Manufacturers and independent companies sell extended warranties.

F

Fair Credit Reporting Act (FCRA)
A consumer protection law that regulates the disclosure of consumer credit reports by consumer/credit reporting agencies and establishes procedures for correcting mistakes on one’s credit record.

Fair Market Value
The amount that a willing buyer would pay at a given point in time for the auto (property) in a realistic transaction.

Fixed Rate Loan
A loan in which the interest rate remains constant throughout the life of a loan.

G

Gross Monthly Income (GMI)
The income you earn in a month before taxes and other deductions. Under certain circumstances, it may also include rental income, self-employed income, income from alimony, child support, public assistance payments, and retirement benefits.

Guarantee of Title (GOT)
A letter that guarantees delivery of a properly completed Certificate of Title.

Guaranteed Automobile Protection (GAP)
A product that pays any remaining balance owed on a loan after payment of a total loss insurance claim.

Guarantor
One who agrees to pay the debt of another.

H

I

Indirect Car Financing
A loan that is originated by a dealership and then sold or assigned to a finance company.

Inspection
The mechanical and physical evaluation of an auto.

Installment Plan
A method of financing a purchase and making payments at regular intervals for a set period of time.

Interest
The cost of borrowing money, usually stated in terms of a percentage. A fee charged for the use of money.

Interest Rate
The interest rate is a part of the annual percentage rate (APR) equation. Interest is the annual rate of return that the lender receives on the Principal of the loan.

J

K

L

Late Fee
A charge assessed by a lender for payments received after the due date has passed.

Lemon Law
A blanket term used to refer to various state laws that protect consumers against the purchase of an auto found to be persistently defective.

Lender
The individual or organization that lends funds to a borrower with the understanding that those funds will be repaid, with interest, based on a clearly defined schedule. It can be a bank, credit union, or finance broker offering or referring the loan.

Lien
A security interest in property, such as an auto, to secure the payment of an obligation.

Lien Holder
The individual or company holding a security interest in collateral to ensure repayment of a loan.

Loan
Money lent to a consumer to be repaid over a period of time.

Loan Balance
The amount owed on a loan after deducting the amount of payments made.

Loan Contract
The written agreement between a borrower and a lender that identifies the terms of the loan.

M

Manufacturer
The original maker of a car.   Ex. Toyota, Nissan, Ford or Honda.

Manufacturer’s Suggested Retail Price (MSRP)
The sales price suggested by the car manufacturer.

Maturity Date
The date at which the balance of the loan becomes due.

Monthly Payment
The amount of principal and interest the borrower is supposed to pay per month.

Motor Club
Motor Clubs provide multiple products and services to enhance member benefits. From 24 Hour Roadside Assistance to Travel Services, maintenance reminders and so on, the assortment is extensive and varies from Motor Club to Motor Club. Triple A (AAA) is one well known example.

N

Non-Prime Lender / Subprime Lender
A lending institution that loans money to individuals with a poor to bad credit.

O

Obligation
The legal responsibility of a borrower to repay a loan.

P

Preferred Placement Form
The form that is completed with an individual’s financial information in order to submit and search for the best matched lender to the individual’s specific credit needs.

Principal
The loan amount borrowed from a lender, not including interest or additional fees.

Principal Balance
The unpaid balance of the auto loan.

Promise to Pay / Promissory Note
A legally binding contract between a lender and a borrower. The promissory note contains the terms and conditions of the loan, including how and when the loan must be repaid.

Q

Qualify
The ability to meet a lender’s criteria for auto credit.

Auto Quote
An estimate of the cost of purchasing a specific automobile.

R

Rate
The annual rate of interest on a loan, expressed as a percentage of 100.

Rebate
A manufacturer’s reduction to the price of an auto, which serves as an incentive to buyers. May also be referred to as a manufacturer’s rebate or customer incentive.

Regulation Z
A regulation that implements the Truth-In-Lending Act. It applies to all lenders and requires disclosure of credit terms.

Retail Price
The amount the buyer actually pays to purchase a car.

S

Secured Loan
A loan that is secured by collateral of some sort.

Security
Assets or personal property pledged as collateral to secure a loan.

Security Interest
An interest in property that secures performance of a credit obligation.

Service Contract
These are contracts that provide financial coverage to repair or replace any failure or breakdown within the limits of the policy.

Simple Interest
A method of calculating interest due by applying a periodic rate to the outstanding balance on a daily basis. As payments are received they are applied first to the accrued interest and then to the principal amount.

Substitution of Collateral
The substitution of a comparably valued car.

T

Term
The period of time which covers the life of the loan.

Title
The evidence one has of right to possession. Also known as Certificate of Title.

Total Sales Price
The total price of a credit purchase including any down payment equal to the total of payments plus any down payment.

Trade-In
A vehicle exchanged for a credit amount on the purchase of a new car. Typically, the trade-in value goes towards the down payment for a car when the new purchase is financed.

Trade-In Allowance
A credit amount given upon purchase of a new car in exchange for their old car. This credit amount may reduce the cash price of the new purchase.

Truth-In-Lending Act
A federal law requiring a disclosure of credit terms using a standard format.

U

Underwriting
The process of verifying consumer information and approving a car loan.

Usury Laws
Laws that sets the maximum interest rate that can be charged on a car loan. These laws vary by state.

V

Vehicle Identification Number (VIN)
An individual serial number assigned by the manufacturer to a motor vehicle. The alphanumeric number consists of seventeen digits and is located on the auto’s dashboard.

W

Warranty
A guarantee from the car dealer or manufacturer that an auto will perform as expected.  Warranties usually cover specific mechanical problems for a specific number of miles or time period.

Wholesale Book Value
The amount a car dealership pays for a used car in wholesale markets such as auctions.

X

Y

Z