The saying is that knowledge equals power, and that certainly is the case here. Learning what these terms mean will allow you to better understand the loan process, from beginning to end. It will also allow you to better negotiate a car loan in London which suits your financial abilities better.
Each of the terms in this dictionary is explained in the simplest way possible, so even someone with no financial experience can quickly understand what everything means. Being confident when negotiating such an important decision is a huge help.
Learning the Terms
As you look for a car loan in London, you’ll find that some of the terms used in the industry can be a little confusing. Already, the process of figuring out which loan is best for your situation and qualifying for it is intimidating. Strange words make everything even more difficult, but you don’t need to suffer.
The following dictionary of car loan terms will help you make sense of what you’re reading and hearing. As a result, you’ll feel better about navigating the whole process.
The process of repaying a car loan through installments, which are in the form of regular payments. These payments cover both the principal and interest on the car loan for London shoppers.
Annual Percentage Rate
Also called APR, this is the yearly rate of interest charged by the creditor. It includes any fees and other expenses which were paid to get the loan.
A balloon loan lowers the monthly payments for a car loan, but with a catch. At the end of the car loan, you’ll need to make a larger balloon payment, which can be significant.
Reference to the Canadian Black Book, or the value of a car based on its age, equipment, and overall condition. Used by dealers and private parties to calculate how much to charge or pay for a car, often called the book value. This is key for securing any car loan in London.
The person who gets a loan to buy a car.
You might have the opportunity to buydown the interest rate on a new or used car you’re purchasing. This means you pay a certain amount and the interest rate is lowered by a specific percentage, which can save you money on the loan in the long run.
Usually a term used when refinancing a car loan in London or elsewhere. It allows you to access the equity you have in the car, getting actual cash in the process, which you can then use on anything you like.
An object which is used to guarantee that a loan is repaid in full. With auto loans, the car itself acts as the collateral. If the borrower doesn’t repay the loan according to the contract terms, the creditor can have the car repossessed or seized.
Any efforts by a creditor to bring a loan account which is delinquent back in line with the loan terms.
Another person who helps to assume responsibility for a car loan for London shoppers or elsewhere. This is necessary when you don’t have credit history or your credit is damaged, with the other party’s credit history used as the basis for the loan approval. Since any late or missed payment on the loan hurt yours and the cosigner’s credit score, both of you have incentive to ensure each payment is made on time.
This is a company or agency which maintains your credit history.
A record of the credit lines you have had and currently are maintaining. It can include details like late or missed payments, plus accounts which were closed and sent to collections.
A system that helps creditors like banks to determine the creditworthiness of anyone trying to secure a car loan in London or other parts of Canada. The score is calculated based on credit history and statistical data relating to credit use in the present.
A bank, credit union, or other lender which extends credit to a consumer for a car loan.
The likelihood a person will repay credit extended through a loan.
When a person fails to follow the terms spelled out in a loan contract. At that point, the creditor has the right to pursue collection actions, which can include seizing the collateral or car, plus bringing other legal actions against the borrower.
The amount of money a buyer presents at the time of a car purchase. This money is not part of the car loan, reducing the total amount of the loan.
The positive difference between what you owe on your car’s loan and what your car is worth. If you sell your car, you would get that extra money and can apply it to a new loan.
Fixed Rate Loan
A car loan where the interest rate is the same from the beginning all the way through the end.
A line of credit where you make payments on a larger balance. Once you’ve paid the loan to the point the original amount has been zeroed out, the loan is closed out and recorded as paid in full.
The agreed-upon method of buying a car through regular installment amounts.
This is a cost associated with borrowing money from a creditor. Usually, the interest rate is stated as a percentage, which is then used to calculate amortization of the car loan for London drivers.
An extra charged assessed by the lender when a payment has been made after a specified due date, which is in addition to the regular installment amount.
The creditor or the organization which lends money to someone for a car loan.
When a lender or creditor puts a security interest in a car to ensure payments on the loan will be made.
The period of time that you will be paying on an instalment loan before it’s completely paid off. The term is usually measured in months, like 48 or 72 months.
Also called LTV, this is a ratio used by creditors to calculate how much they will lend for the purchase of a particular car, based on its market value.
The date when the full balance of a car loan is due and must be paid.
The cost of the car being financed, or the purchase price agreed upon at purchase.
Short for “refinancing.” If you and your car qualify for refinancing through a creditor, you can possibly get a better interest rate on the new car loan in London, which in turn can save you money. Refinancing can change the loan term as well.
When a person owes more for a car loan than the car is actually worth.