Credit and Contract Terms Glossary
What's Secured Financing? What's an Acquisition Fee? For your convenience we've provided simple, clear definitions for all important credit and contract terms.
BANKRUPTCY
A legal action under which debtors unable to pay their debts can petition a court to either be released from their obligations after a court has liquidated their assets or to allow debtors to pay a portion of their debts.
CAPACITY
The amount of cash one has available to make payments on new debt after all existing obligations have been paid.
CHARACTER
Stability plus willingness to pay equals a borrower's financial character.
COLLATERAL
An asset that is pledged as security for a loan or financing, such as a vehicle. The creditor has the right to take control of and sell the collateral if payments are not made as agreed.
CREDIT BUREAU
A company that gathers data on how individuals are paying or have paid their credit obligations. The information is provided to creditors when specifically requested.
CREDIT HISTORY
The record of how a person has borrowed and repaid debts.
CREDIT LINE
A specific amount of money available for credit use by a borrower.
CREDIT REPORT
The form the credit bureau issues containing the financial and personal data about an individual.
CREDIT SCORE
A numerical representation of the likelihood of an individual meetings his or her credit obligations, calculated using statistical models.
CREDITOR
The company or person providing (or holding) the financing or loan. This is also known as a lender or finance source.
CREDITWORTHINESS
An individual's past, current and future ability to repay debts, in most cases determined by reviewing the individual's credit history.
DEFAULT
A failure to meet credit obligations as agreed.
FINANCE CHARGE
The cost of credit expressed as a dollar amount. This is the amount charged to the purchaser by the lender for use of money.
INQUIRY
A creditor request for a copy of an applicant's credit report. Inquiries are noted on the report.
LATE CHARGE
A dollar or percentage charge imposed by a lender on a borrower when the borrower fails to make a payment within the specified period after the payment due.
LEASE
A financial transaction in which an individual contracts for use of a vehicle under specific terms such as miles driven, monthly payment, turn-in condition at lease-end, liability for physical damage, and fees and penalties.
LIEN HOLDER
An individual, partnership or corporation with a security interest in an asset.
SECURED FINANCING
A form of financing in which collateral backs the credit.
UNSECURED FINANCING
Financing that does not require collateral.
ACQUISITION FEE
A charge paid by the lessee to the lessor that helps to cover the cost of acquiring and servicing the contract. This fee is either paid up front or included in the gross capitalized cost.
ADD-ON PRODUCTS
Includes, but is not limited to, extended service plans, approved dealer-installed equipment, rust-proofing and sealant packages that are added to the total cash price of a vehicle and included in the amount financed.
AMOUNT FINANCED
The total amount of credit provided to you that is subject to finance charges. It is determined by the sale price of the vehicle plus any charges for taxes, title, license fees, service contracts – such as an extended service plan – and any other fees, less the down payment, manufacturer's rebate or trade-in.
APR
Your Annual Percentage Rate (APR) is a measure of the cost of credit expressed as a yearly interest rate. All lenders are required to disclose their rates as an annual percentage rate to allow consumers to make an informed comparison.
CO-SIGNER
A credit worthy person who agrees to share the loan obligation.
DOWN PAYMENT
The total amount of money you pay up front to reduce the amount financed.
FINANCE AGREEMENT
The written contract between the parties in a financing transaction. The terms of this agreement are legally binding on both parties.
MANUFACTURER'S SUGGESTED RETAIL PRICE
The price of a vehicle recommended by the manufacturer also called the "sticker" price.
SECURITY DEPOSIT
Cash amount collected at the beginning of the lease as security for performance of all lease obligations.
TERM
The number of months you agree to pay off the contract (loan) in equal monthly installments (payments).
