Auto Loan Learn the Terms

Car Talk
Below are some terms you may hear when shopping for a new or used vehicle or auto loan. Some words may have more than one meaning. Only those meanings relating to this site will be used.

Definitions A - Z

Payment
The process of paying money that is owed each month, such as a monthly mortgage payment, or a monthly car payment.

Payment to Income Ratio
Your monthly car payment compared to your gross monthly income. Most lenders prefer this ratio to be less than 15%.

Pre-Approved Loan
A loan the lender issues to the borrower "before" buying a home or automobile. These loans are usually valid for a limited time only, such as 30 days from the loan approval date. Pre-approved only means that a potential customer has passed a preliminary credit information screening. Neither a pre-approved nor a pre-qualified are seen as absolute loan commitments. To give yourself the negotiating advantage at the car dealership, always get a pre-approved loan. Have a pre-approved loan check draft with you when you walk into the car dealership. Having a pre-approved loan gives you the negotiating power of a cash buyer who the dealer views as ready to buy the right auto at the right price.

Prepayment Penalty
A lender's charge to the borrower for paying off the loan before the end of the term. Always check with the lender if you can pay extra payments or pay the entire loan off early (if you choose) without a penalty.

Principal
The amount of money borrowed or the amount of the loan that has not yet been paid back to the lender. This does not include the interest you will pay to borrow that money. The principal balance (sometimes called the outstanding or unpaid principal balance) is the amount owed on the loan at any given time.

SCAMS & FRAUD
Some Scams, Fraud, and Consumer Abuse Items in the News

Federal Laws
Major Laws That Govern Financial Institutions & Protect Individuals in Their Financial Dealings

Organizations

Fannie Mae
Freddie Mac
Ginnie Mae
Nellie Mae
Sallie Mae

Consumer Info

Consumer Tips
Credit Bureau
Credit Insurance
Credit Report
Directory of Federal Agencies
Federal Trade Commission (FTC)
Identity Theft
Predatory Lending
Repair Your Bad Credit
Truth in Lending Act
Borrowers Beware

Miscellaneous

Private Mortgage Insurance (PMI)
Prepayment Penalty

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