Capital Auto Loan - Auto Loans Glossary

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 financed, any charges, and the term of the loan.

Appraisal
Eestimate of the value of property, made by a professional appraiser. Usually on the trade in vehicle.

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

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.

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.

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

Commission
When a sales agent completes a sale, that individual is paid money by the seller for those services rendered.

Commitment
An agreement 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. Read more about credit score guidelines.

Credit Bureau
An agency that keeps your credit record. Read more about credit agencies.

Credit Card
Card used to borrow money or buy goods or services on revolving credit. Examples are Visa, MasterCard, American Express and Discover.

Credit Scoring System
Statistical system used to rate credit applicants according to various characteristics relevant to creditworthiness. Read more about credit score guidelines.

Creditor
A lender to whom money is owed.
Creditworthiness
Past and future ability to repay debts.

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

Delinquency
Failure to make payments on time.

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.

Gross Monthly Income
The total amount the borrower earns per month, before any expenses are deducted.

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.

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.

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.

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
Final document that proves an individual’s ownership of property.

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

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