Auto Loan Glossary

Our auto loan glossary will help you better understand some of the terms and there definitions used in auto loan financing.

Accrue
The accumulation of interest charges.

Adverse Action
The refusal to grant credit to a person applying for credit.

Adverse Action Notice
A document that explains why credit has been denied.

Amortization
The repayment of a loan by regular installments that covers the principal and interest.

Amortization Table
A table showing the amount of a principal and interest due at regular payment intervals.

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

Amount Financed
The amount of credit provided by a lender.

Annual Percentage Rate (APR)
The Annual Percentage Rate (APR) is a yearly rate of interest that includes all of the fees and expenses paid to acquire a loan.

Application
An initial written statement of personal and financial information required for an evaluation of creditworthiness.

Assets
Anything of monetary value that is owned by a person.

Bankrupt
When a person 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 can relieve the debts by transferring his or her assets to a trustee.

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

Borrower
An individual that obtains credit from a lender.

Broker
A person who assists in negotiating contracts and who works on a commission or a fee.

Co-Buyer
An individual who purchases an auto jointly with a Buyer. This individual is jointly liable for repayment of the loan.

Co-Owner
A second owner of a vehicle.

Co-Signer
An individual who agrees to pay the amount due if the buyer fails to meet contractual obligations.

Collateral
Assets that guarantees the repayment of a loan.

Collection
The efforts used to bring a delinquent account current..

Credit Reporting Agency
An organization that prepares reports used by lenders to determine a potential borrower's credit history.

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

Credit Bureau
An organization that gathers consumer credit information. The are three major credit bureaus: Equifax, Experian, and TransUnion.

Credit History
A record of an individual's credit payment and debt history. A credit history helps a lender to determine the credit worthiness of an individual who has applied for credit.

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 credit worthiness.

Credit Score
A assessment used to evaluate the amount of "risk" involved in a credit transaction.

Creditworthiness
Determination of a consumer's eligibility to borrow money.

Debt
An amount owed to another person or organization.

Default
Failure to comply with the terms of a loan contract.

Delinquent
The failure to make a loan payment on time.

Direct Financing
A loan is originated directly between a lender and a consumer..

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

Effective Gross Income
Normal annual income including overtime that is regular or guaranteed.

Fair Credit Reporting Act
A consumer protection law that regulates the disclosure of consumer credit reports and information.

Finance Charge
Interest charges applied to a loan.

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

Guarantor
A person who agrees to pay the debt of another.

Interest
The cost of borrowing money.

Interest Rate
The interest rate is a part of the annual percentage rate (APR) equation.

Late Fee
A charge assessed by a lender for payments received after a specific due date.

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 Term
The length of the loan, usually broken down into months (24, 36, 48, and 60 months, etc).

Loan-to-Value Ratio
A ratio used to determine the amount of money a lender will loan based on the value of a car

Monthly Payment
The amount of principal and interest the borrower is obligated to pay back each month.

Non-Prime Lender
A lending organization that loans money to individuals with a poor credit history.

Principal
The financed amount that interest will be paid on.

Principal Balance
The unpaid balance of a loan.

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

Secured Loan
A loan that is secured by collateral.

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.

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