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Car Loan Terminologies


• Terms Starting With "A"

Acceleration Clause

In case the borrower does not repay his loan, the lender has a choice to speed up the rate of loan. This clause helps the entire amount of loan to be paid off immediately.

Agreement of Sale

It determines the terms and conditions under which the buyer is buying and the seller is selling. Later, both the parties sign the contract.


The process of writing off or liquidating an asset or loan periodically on an installment basis is called Amortization.


The estimation of the value of a property is called Appraisal. A professional appraiser makes it.


It is a valuable resource owned by a business that can be used to repay any debts.

Automated Teller Machine (ATM)

It is an electronic terminal through which customers can withdraw, check balance, and deposit money in a much easier and quicker way.

• Terms Starting With "B"

Base Price

Base Price is the cost of a car. It is also called "Sticker Price".

Billing Error

It refers to error or mistake in the monthly billing statements of a customer.


A Broker is one who assists in the arrangement of funding and in the negotiation of contracts.

Business Days

These refer to days when a company is open for trading purposes.

• Terms Starting With "C"

Certificate of Title

A certificate of ownership issued by the Department of Motor Vehicles is called Certificate of Title.


When the buyer, the seller and the lender negotiate on property and funds, it is called "closing" or "settlement".

Cloud (On Title)

Cloud refers to an outstanding claim, which has a negative impact on the marketability of



Properties or assets that are offered to secure a loan or other credit is known as Collateral.


A charge assessed by a real estate agent or a broker for a service rendered is called Commission.


A consignor is one who signs on behalf of the borrower of the loan and shares equal responsibility for it. This actually happens when the principal borrower does not have enough credit to take on the loan responsibility himself.

Credit Analysis

This refers to the process of determining whether an applicant satisfies the credit standards of a firm and the amount of credit that should be extended to him.

Credit Bureau

An organization to which business firms apply for credit information on prospective customers is known as Credit Bureau.

Credit Card

It is a plastic card having a magnetic strip issued by a bank, which authorizes the holder to buy goods or services on borrowed money. For e.g. Visa, MasterCard, etc.

Credit Period

This refers to time given to a buyer to make full payment for credit purchases beyond the expiry of which the payment becomes outstanding.

Credit Policy

This entails norms and guidelines to determine whether and how much credit is to be extended to a customer.

Credit Scoring System

This system provides a rating for all credit applicants on the basis of various characteristics in regards to creditworthiness.

Credit Terms

These terms represent the repayment terms extended by a firm to its debtors.


A person to whom money is owed is called a "Creditor".

• Terms Starting With "D"

Debit Card

A Debit Card is a card that enables the holder to withdraw money or to have the cost of purchases charged directly to the holder's bank account. In case of debit cards, customers do not require going to the bank to remove the cash from their account and can just go any ATM for the same.


Failure of repayment of loan is known as Default.

Dealer Holdback

This is offered by the manufacturer to the dealer allowing the latter to purchase a vehicle at a lower price as compared to the invoice price.

Down Payment

Payment made at the time of purchase of a vehicle is called Down Payment. The balance is to be paid later.


Disclosing relevant information about the vehicle to the consumer is called Disclosure.

• Terms Starting With "E"

Electronic Fund Transfer Systems

It refers to a system whereby funds can be transferred electronically rather than by cheque.

Equal Credit Opportunity Act

According to this Act, all kinds of borrowers should be treated equally.


Holding of assets or securities by another party is called Escrow.

• Terms Starting With "F"

Financial Analysis

Evaluation of the financial position of a firm is known as Financial Analysis.

Financial Leverage

The extent to which interest on debt magnifies changes in operating income into even greater proportionate changes in earnings after taxes is called Financial Leverage. It is also known as "Trading on Equity".

• Terms Starting With "G"

Gas Guzzler Tax

An additional tax on the sale of vehicles that have poor fuel economy is termed as Gas Guzzler Tax.

Gross Monthly Income

The total monthly income before taking taxes or deductions into account is called Gross Monthly Income.


It refers to a pledge whereby one person assumes responsibility for paying another"s debts.

• Terms Starting With "H"

Hazard Insurance

In this type of insurance, the insurer protects the insured against losses such as fire, windstorm and the like.

• Terms Starting With "I"


This means taking temporary possession of as a security by legal authority.


It refers to charge by the lender on the borrowing money, typically expressed as an annual percentage rate.

• Terms Starting With "J"

Joint Account

It is an account shared by two or more people to share legal responsibilities in the repayment of loans or debts.

• Terms Starting With "L"


One that holds a lease is termed as Lessee.


One that lets property under a lease is termed as Lessor.

• Terms Starting With "M"


Manufacturer"s Suggested Retail Price

• Terms Starting With "N"

Net Effective Income

Income after all expenses and taxes have been deducted is called Net Effective Income.

• Terms Starting With "P"

Point-of-Sale (POS)

A physical location where the consumer makes a purchase is called Point-of-Sale (POS).

A customer can also make payments electronically through this mechanism.

Prepayment Penalty

Those who make early payment of loans are required to pay penalty imposed by a bank called Prepayment Penalty.

• Terms Starting With "R"


Rescission means the cancellation of a contract.


This refers to a process whereby an existing loan can be paid from the proceeds of a new loan at a lower interest rate.

• Terms Starting With "S"

Service Charge

These charges are related to the financial aspects of processing a loan.


The capacity of a firm to meet its pecuniary obligations is called "Solvency".

• Terms Starting With "T"


It is a charge levied on the cost of a vehicle.

Title Search

It refers to a proper examination of municipal and public records to confirm the legal ownership of a property.


A trustee is responsible for managing assets for the benefit of someone else.

• Terms Starting With "U"


The process of issuing insurance policies is called Underwriting.


When the loan amount is greater than the present value of a vehicle, it is termed as Upside-down.

• Terms Starting With "V"

Verification of Employment

It refers to a written verification by the employer to his employee giving the salary and job details in it.

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