When you are ready to buy a used car you’ll notice there are different financing terms being used. Below are the terms often used and the definitions of those terms to help you understand exactly what the dealer is referring to when these terms are used.
Amortization is the principal and interest on a loan and the Annual Percentage Rate (APR) is the cost of the credit. An “assignee” is the specific financial institution that purchases the contract from the dealer. If a consumer gets financing from an outside lender is usually through a bank or credit union while “on-site financing” is getting a loan directly through the dealership. The “balance” is the amount owing on the loan and a “loan” is borrowing money for the purchase of the vehicle.
The amount that the interest rate can fluctuate on an adjustable rate loan is referred to as the “cap” while the highest monthly payment that may be obtained is referred to as the “cap payment”. A finance company that is privately owned by a manufacturer and is set-up to finance a dealers’ automobile inventories, or make loans to car buyers, is referred to as a “captive finance company”.
Sometimes it is necessary to have a “co-buyer”. This is a person who is willing to assume responsibility of the repayment of a loan. If a purchaser has a low credit score, a co-buyer, also referred to as a co-signer, can help get finance approval. Sometimes the finance company will allow a consumer to use “collateral” to ensure the repayment of a loan. If the loan is not paid then the asset used as collateral will be lost. You will be in “default” or considered a “default account” if this situation happens.
Once the loan has been prepared and the terms are agreeable between you and the seller you will “close” the deal. The term “closing” simply mean that the money has transferred from the buyer to the seller legally and the ownership is transferred into the buyer’s name. At this time the information is given to the consumer about the financing and the entire transaction. This is referred to as the “disclosure”.
Tags: auto loan, credit rating
This entry was posted on Wednesday, August 25th, 2010 at 12:44 pm and is filed under Auto Loans, Car Loans. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.