27 Car Finance Terminology Phrases

Car Finance Terminology What Does This Mean?
Administration Fee A fee charged monthly by a lender, to maintain a loan.
Balloon A percentage of the car price,usually 30%.

Balloon Payments are typically required by borrowers who require lower repayments.The balloon payment is added to the end of the loan.

This was formerly referred to as a residual value.Which is a balloon on a leasing agreement.The popularity of leasing finance has faded significantly.

Bankruptcy  A legal proceeding,instigated by a creditor,when a borrower (can’t or won’t) honour their finance obligation.

Bankruptcy wipes the debt,however the bankruptcy listing lasts for life on the bankruptcy index. Bankruptcy normally lasts for 3 years and 1 day.

Case by Case This simply means that each loan application is assessed on it’s own unique merits or demerits.

A loan manager will take on board the individual’s circumstances, hence is why each loan application is judged on a case by case basis.

COC A car insurance policy,known in the insurance business as a “Certificate Of Currency”

The certificate of currency, is a shortened version of a insurance policy,required by car lenders,as proof the car is insured.

Commitments A list of current financial liabilities.Which includes mortgage/rent,car loans,personal loans,credit cards,store cards.
Comparison Rate The interest rate,plus all loan fees and charges.

A comparison rate is the true and accurate interest rate,the borrower has committed to.

Credit Report The most important factor in a lenders decision making whether to approval or decline a loan application.

The credit report has the applicants financial history,credit score,residential history,employment history and any positive/or negative financial transactions.

Credit reports are strictly relied upon,and a financial decision will never be made,without one in the lenders possession.

Credit Score A credit score is a historical analysis of a applicants credit history.This analysis is condensed down to a numerical rating,known as a “credit score” A higher score (700-850) will gain the lenders approval,leading to higher loan amounts and cheap interest rates.

On the other hand,serial non-payers and addicted loan enquirers,can expect a credit score of 300-500.This score leading to double digit interest rates,and loan scrutiny.

Debt Consolidation If a consumer has multiple loans and credit cards,these can be consolidated into one payment at a suitable interest rate.
Default Legally,a monthly repayment in arrears exceeding one week,is categorised as in default.This status can attract late fees,downgraded credit score and future scrutiny.
Financials Financials is a lending institution term for a set of income statements.These a abridged version of the applicants business tax returns.The financials show income and expenses in a form,that enables the lender to make a decision whether the applicant can service the loan.
Interest Rate Unlike the comparison rate.The base interest rate of the loan excludes loan fees and charges.
ITR This is the applicants “Individual Tax Return” required by the lender,for servicing purposes.
Loan Term The term of the loan, can be calculated in years or months.
NOA When the Australian Taxation Offices processes a tax return.As confirmation of processing,they issue a “Notice Of Assessment”

The Australian Taxation Office,lists on the NOA, the taxable income and balance refundable or owing.

Pay Day Loan A short term loan,usually $2,000 or less,at astronomical rates of 30%-50%,given at terms of weeks or a few months.
PAYG A salaried worker is remunerated as,”Pay As You Go’

A PAYG employee receives income from a employer, in weekly or fortnightly pay cycles.

PAYG Summary A detailed wage document,provided to employees,stating income earned for a pay cycle.Will show gross income,tax witheld,superanuation,benefits etc.

This document is known as a payslip.

Payout Letter  The exact figure remaining on a loan,with a expiry date. This figure is provided in writing to the borrower.
Privacy Consent The Commonwealth Of Australia (Privacy Act 1988) was enacted,to provide statutory protection to all consumers.This protection states that all financial providers must have a signed privacy act,executed by the consumer,in the possession of the lender,PRIOR to accessing the consumers personal information.Violation of the consumers rights (for example,processing a loan without the signed consent),can lead to prosecution by the privacy commissioner,by way of a fine of $300,000 for corporations.
Servicing (a loan) Being able to display evidence that tax returns for business/job indicates sufficient income to comfortably pay all loan commitments,plus living expenses.
Tiering Car finance lenders assess loans, by way of applicants being awarded points or deductions by way of their personal profile.

Typically lenders will award points to a car that is up to five years of age, home buyer,in business/job more than three years,and deduct if these arn’t evident.

Vendor When a car is sold by private treaty,the private seller,is known as a “vendor”.
VIN The 17 digit “Vehicle Identification Number” that uniquely identifies the vehicle by way of a pressed metal plate,located inside a door or under the bonnet

The VIN plate shows the manfactures, build date, make/model and country of manufacture.

YTD The “Year To Date” earnings/income earned since the commencement of the financial year
Zero Interest Loans usually offered by NEW CAR dealerships,to increase sales.

The benefit to the consumer is zero interest.However,the sales price remains as non-discountable.The dealer subsidises the lender for part interest.

Contact Us today, and let Loan-s approve your loan fast.We are waiting to welcome you on 1300 663 983.

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