Glossary
Actual Cash Value is the value of a vehicle based on sources like Kelley Blue Book.
The process of payments that go towards a loan where a portion is applied to the principal and to interest.
Annual Percentage Rate is the interest rate plus the fees charged by the lender, expressed as a total percentage.
A fee based on a percentage of the principal that is charged by a lender for money that is borrowed.
A parent, family member, or close friend who signs a loan agreement with the original borrower and is responsible for repaying the loan if the borrower cannot satisfy the payments.
Credit balance divided by credit limit. To find overall credit utilization, take the sum of your balances from all cards, then divide it by the sum of credit limits for those cards.
An initial payment that is usually a percentage of the total purchase price. The higher the down payment, the less money the loan will be overall.
Guarantees interest rate remains the same throughout the life of the loan.
Force-placed Insurance – If the borrower fails to get insurance coverage for the vehicle they purchase, or they let the insurance lapse, the lender will enact a force-placed insurance policy. This insurance is often more expensive than regular coverage.
The cost paid for a loan expressed as a percentage that doesn’t include the lender’s fees associated with the loan.
An “in house” loan through a dealership offered to borrowers with less than ideal or no credit.
An evaluation of a potential borrower’s buying power. This is not a guaranteed offer from the lender.
The amount of the loan without the interest and fees.
The total length of the loan expressed in months.
The process of revising or replacing a borrower’s loan agreement to get a better interest rate or a new payment schedule.
The amount of money paid to purchase the vehicle including down payment, principal, and interest.
