Auto Lending & Finance Glossary
We invite you to explore the Paydownhero auto lending and car finance glossary. Below, please find definitions for commonly used terms during the purchase, refinancing, and insurance process of purchasing and owning a car.
Please keep in mind that many people define some of these terms differently. We are here to educate you and provide you with our definitions. If you have questions or disagree with one of our definitions, please don’t hesitate to contact us.
A
Customers take out auto loans in order to finance the purchase of a vehicle.
It is the financial institution that loans money to a consumer in order to buy or refinance a vehicle.
The total annual cost of taking out a loan is expressed as an annual percentage rate (APR)
A discount is an insurance premium reduction that is normally based on a percent.
B
It is the financial institution that loans money to a consumer in order to buy or refinance a vehicle.
The Kelley Blue Book (KBB) value of a new or used vehicle is referred to as its “blue book value.”
An insurance binder serves as evidence that you have acquired coverage between you and your insurance provider.
Amounts paid each month for principal and interest are known as amortization.
In the automotive industry, a borrower is someone who takes out a new or used car loan or refinances an existing one from an auto loan provider.
Borrowers can find the best car loans by comparing multiple lenders and their lending rates thanks to brokers, or more particularly, “auto loan brokers.”
C
When a policyholder or insurer terminates the contract early, it is known as a cancellation.
When an automobile manufacturer has a financial services arm, it has a captive lender.
You and an insurance provider enter into a contract or policy that protects you from financial loss in the case of a car accident or automobile theft.
Insurance policies are provided by a carrier, which is a type of insurance firm or insurance provider.
When your insured property, such as your car, is damaged, you must file a claim with your insurance provider in order to receive compensation.
In the form of CLUE Reports, LexisNexis® provides comprehensive loss underwriting exchange information.
As the name implies, a co-borrower shares the primary borrower’s obligation to pay back the loan.
Damage to an insured vehicle as a result of contact with another vehicle or item is covered under collision coverage.
Damage to all physical components For example, if your vehicle is stolen or damaged as a result of a natural catastrophe or other occurrence that is covered by your insurance, you would receive compensation.
The underwriting decision has three possible responses, one of which is a counteroffer.
According to your policy’s limits, the maximum amount of money that your insurance provider, or insurer, will pay out is determined by the sort of claim you file.
Inquiries into your credit report and history are known as credit pulls. Authorized individuals are the only ones permitted to execute credit pulls.
In order to determine a borrower’s ability to repay a loan, a lender will do a hard credit check.
In addition to a borrower’s credit history, soft credit pulls look at their borrowing patterns.
An individual’s credit history, often spanning the previous seven to ten years, is included in a credit report.
When it comes to auto loans, there are certain similarities between a credit union and a bank.
Lines of credit are provided by a creditor in order to facilitate the borrowing of money.
D
To encourage customers to purchase a specific vehicle, manufacturers often offer rebates to dealers.
Personal information such as your name and address, along with information about the insured property like its description and storage
When you file an insurance claim, you are responsible for paying the deductible, which is a fixed amount.
Drivers who have taken a course in defensive driving are eligible for the discount.
The completion of a certified driver safety programme or a similar sort of training is required for discounts on defensive driving courses.
Depreciation is the process of spreading out the cost of a piece of property over the time it will be in use.
A discount is a reduction in the cost of insurance premiums, usually expressed as a percentage.
E
The difference between what you still owe on your auto loan and what your vehicle is worth if you sold it is how equity, or a person’s stake in the vehicle, is calculated. As you pay down your car loan, you build equity in the vehicle.
The term “exclusions” refers to things that are not covered by your auto insurance policy or its limits.
A credit reporting agency, Experian is one of many companies that make up the financial landscape.
If you have car insurance, you’ll find the expiration date in the declarations page.
F
When a car buyer and a dealership come to an agreement to repay the loan amount over time, this is known as a vehicle financing contract.
At car dealerships, finance managers take care of all the paperwork and contracts involved in purchasing a vehicle.
Lenders use FICO® scores to assess the risk of lending money to a particular borrower. Lenders use these scores to compare potential borrowers to new lending opportunities.
G
Some car insurance companies offer a good student discount to full-time students who maintain a 3.0 or higher grade point average.
Adding Guaranteed Asset Protection (also known as GAP) to your auto loan is an option. A car loan must be repaid in full if you borrow money.
H
Typically, a lender’s headline interest rate is listed in their promotions, advertisements, and pre-application submission listings. This is the lender’s most competitive interest rate.
I
A collision with another vehicle or an object, whether moving or stationary, is covered by automobile insurance policies.
Insurable interest means that you have a valid reason for purchasing auto insurance to cover a specific vehicle.
It is the insurance adjuster’s job to look into any claims the insured may have filed.
A person’s insurance score is based on a variety of factors, including their credit history, and it indicates how likely they are to make a claim.
A person, company, or organisation that is listed on an insurance policy and is therefore protected by it is known as an insured.
The amount a lender charges for borrowing money is determined by the interest rate applied to the principal.
L
It is considered late if you do not make your monthly auto payment by the due date.
If you don’t want to build equity in a vehicle, leasing a vehicle is an option. The manufacturer or its finance arm typically owns the vehicle in a lease transaction.
Financial institutions that lend money to people who need it, such as to buy a car, are called lenders.
If the insured is found liable for the harm or loss suffered by a third party as a result of the insured’s negligence, the insured is covered by liability insurance.
A lien on a vehicle is a form of collateral. The borrower agrees to repay the loan in accordance with the terms of the loan agreement, and the lender is granted a security interest in the vehicle as a condition of the loan.
All policies include limits of liability, which is the amount of coverage you have listed on your policy.
The terms, rates, and costs of the loan are spelled out in the loan agreement.
When calculating a vehicle’s loan-to-value (LTV) ratio, the amount of money borrowed is divided by the vehicle’s market value.
An auto refinancing officer can help prospective borrowers through the entire process of applying for a loan and submitting it.
Applicants for a loan are required to submit a loan application package, which includes all of the necessary paperwork.
M
Insurance coverage that is required for drivers to drive on public roads is referred to as “mandatory coverage.
The MSRP, or manufacturer’s suggested retail price, is the most common term for a vehicle’s sticker price.
A lending marketplace connects you to a variety of financial institutions.
Car accident-related injuries and deaths are covered by medical payments coverage, which pays for medical and funeral costs.
As long as the monthly car loan payment has not been made, it’s a missed payment.
The odometer on a car keeps track of a vehicle’s distance travelled and displays that information as a numerical value.
The Department of Motor Vehicles (DMV) keeps track of every vehicle registered in a state (DMV).
N
To get a better idea of how much a car is worth, you can use NADA values. The National Automobile Dealers Association is known as NADA.
The insurance policy’s “named insured” is the person whose name appears on the policy and is typically the person who purchases the policy.
O
Optional coverage refers to optional extras that you can purchase in addition to your standard auto insurance policy.
P
Auto loan debtors must pay their lenders monthly instalments in order to complete their loan repayments.
You, the insured, and the carrier, or insurer, are parties to a legal contract known as a policy.
Legal documents such as powers of attorney (POA) give third parties, such as banks, the authority to act on your behalf.
In the lending process, pre-qualification occurs when lenders assess your basic personal information
A policy’s premium is the amount you pay to insure yourself for the term of the policy.
Principal is the amount of money that a borrower must put down to secure a car loan. Amount borrowed from a lender, which is what you owe them back in total.
Selling a vehicle to another individual without going through a dealership is what is known as a “private party” transaction.
If you are found liable or responsible for damage to someone else’s property, your property damage liability insurance will pay for the loss.
Q
A quote, or insurance quote, is the insurance company’s estimate of how much the insured will be charged for their policy.
R
When it comes to refinance auto loans, the process is very similar to that of refinancing a home loan.
The Department of Motor Vehicles, or DMV, issues an official document known as a registration to prove that a vehicle has been registered in a particular state.
When a borrower has paid off all of the principal and interest on a loan, the remaining loan value, also known as the remaining loan balance, is the remaining amount owed.
When a borrower has paid off all of the principal and interest on a loan, the remaining loan value, also known as the remaining loan balance, is the remaining amount owed.
When a covered claim arises, rental reimbursement coverage pays for the cost of a rented vehicle.
S
Lenders and creditors use security interests to protect the money they loan out.
Documentation issued by the courts to prove that drivers have insurance policies that meet certain standards
T
Your state’s Department of Motor Vehicles, or DMV, issues a vehicle’s title, which is an official document that demonstrates who owns the vehicle.
If the property has been damaged beyond repair, it is considered a total loss and can no longer be repaired on account of the costs involved.
If your car breaks down or is involved in an accident, you may want to consider adding towing and labour coverage to your auto insurance policy.
Used car trade-in values are what you can expect to get from a car dealership when you sell your current vehicle as part of the down payment on a new vehicle.
When it comes to getting a car loan, the Truth in Lending Act, or TILA, is a key piece of legislation to keep in mind.
U
Insurance companies and agents use underwriting to determine whether or not they will offer coverage to a potential customer.
If you or a passenger in your car is injured by a driver who does not have any insurance, also known as an uninsured driver
You’re covered if your car is damaged by someone who doesn’t have any insurance, also known as “uninsured,”
V
This unique sequence of letters and numbers is known as the VIN and is used to identify a specific vehicle.
The make of a vehicle is the name of the manufacturer. Chrysler, Ford, Honda, Jeep, and Toyota are just a few examples of manufacturers.
Additional features and add-ons not included in the base model or trim are known as options.
There are a variety of options and features that are included in a vehicle’s trim package.
Service contracts for vehicles, also known as VSCs, are a way to cover the cost of major repairs and get your car back on the road quickly.
W
