|Car Finance Terminology
|What Does This Mean?
|A fee charged monthly by a lender, to maintain a loan.
|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.
| 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.
|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.
|A list of current financial liabilities.Which includes mortgage/rent,car loans,personal loans,credit cards,store cards.
|The interest rate,plus all loan fees and charges.
A comparison rate is the true and accurate interest rate,the borrower has committed to.
|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.
|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.
|If a consumer has multiple loans and credit cards,these can be consolidated into one payment at a suitable interest rate.
|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 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.
|Unlike the comparison rate.The base interest rate of the loan excludes loan fees and charges.
|This is the applicants “Individual Tax Return” required by the lender,for servicing purposes.
|The term of the loan, can be calculated in years or months.
|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.
|A salaried worker is remunerated as,”Pay As You Go’
A PAYG employee receives income from a employer, in weekly or fortnightly pay cycles.
|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.
|The exact figure remaining on a loan,with a expiry date. This figure is provided in writing to the borrower.
|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.
|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.
|When a car is sold by private treaty,the private seller,is known as a “vendor”.
|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.
|The “Year To Date” earnings/income earned since the commencement of the financial year
|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.
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