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
C
Co-Applicant
Another person who joins the applicant (you) in applying for a loan.
Co-Buyer
A Co-Buyer's income is combined with the buyer's. This option is normally limited to a spouse or a person closely related residing at the same residence.
Co-Signer
Someone who assumes legal responsibility for repayment of a loan in the event the borrower does not pay. A Co-signer may be considered for a buyer who does not comply with all the credit requirements. You may be allowed by the creditor to have a co-signer sign the finance contract with you in order to make up for any deficiencies in your credit history. The income of the buyer, however, must meet all the income and budget guidelines without reliance upon the income of the co-signer. A co-signer assumes equal responsibility for the contract, and the account history will be reflected on the co-signer's credit history as well. For this reason, everyone should exercise caution if asked to co-sign for someone else. Since many co-signers are eventually asked to repay the obligation, be sure you can afford to do so before agreeing to be someone's co-signer.
Commercial Bank
A financial institution that offers a variety of financial services including checking accounts, savings accounts, CD's, mutual funds, credit cards, IRA's, savings bonds, trust services, online banking services, mortgage loans, auto loans, boat loans, student loans, personal loans, construction loans, home improvement loans, business loans, second loans secured by home equity, home equity lines of credit and a wide range of other services.
Commission
An amount of money, usually a percentage of the sales price, that is collected by sales professionals, real estate agents, car sales representatives, loan officers, attorneys, insurance agents, brokers, escrow representatives, etc., as a fee for negotiating a transaction or performing a service.
Consumer Reporting Agency (CRA)
An agency that gathers and sells the information in your credit report to creditors, employers, insurers, and other businesses. There are many types of consumer reporting agencies, including credit bureaus (the most common type), and specialty agencies (such as agencies that sell information about check writing histories, medical records, and rental history records). The 3 major credit bureaus are Equifax, Experian, and TransUnion. More about Credit Bureaus
Contract
A legally enforceable agreement between two or more competent people that creates an obligation to do or not to do a particular thing.
Convey
To transfer ownership of the title to property from one to another.
Credible
Capable of being believed, plausible, worthy of confidence, reliable.
Credit
Credit is more than just a plastic card used to buy things. It's your financial trustworthiness. Good credit means that your history of payments, employment and salary make you a good candidate for a loan, and creditors (those who lend money or services) will be more willing to work with you.
Having good credit usually translates into lower payments and more ease in borrowing money. Bad credit, however, can be a big problem. It usually results from making payments late or borrowing too much money, and it means that you might have trouble getting a car loan, a credit card, a place to live and, sometimes, a job.
People who are just starting out might find it hard to get a loan or a credit card. That's because having no credit history makes it difficult for lenders to know if you're a good risk to repay a loan and make your payments on time. Establishing a good credit history is not as difficult as it seems. In all cases, however, you'll need to make payments on time. Some tips include:
1) Apply for a credit card through a local store. Local stores are more likely to extend credit to people without an established credit history.
2) Apply for a secured credit card. By borrowing against your own money, creditors find this to be far less risky.
3) Ask someone with a good credit history to co-sign on a loan or a credit card application. By co-signing, the person is agreeing to pay back the loan if you don't.
Credit Bureau
These are agencies that gather and sell the information in your credit report, also called consumer reporting agencies (CRAs). The three major credit bureaus are Equifax, Experian, and TransUnion LLC.
Credit Counseling
Many universities, military bases, credit unions and housing authorities operate nonprofit financial counseling programs. Some charge a fee for their services. Creditors may be willing to accept reduced payments if you are working with a reputable program to create a debt repayment plan.
Credit History
A credit history is a record of credit use. It is comprised of a list of individual consumer debts and an indication as to whether or not these debts were paid back in a timely fashion or as agreed. Credit institutions have developed a complex recording system of documenting your credit history. This is called a credit report.
Credit Insurance
Optional insurance that pays the scheduled unpaid balance if you die or scheduled monthly payments if you become disabled. As with most contract terms, the cost of optional credit insurance must be disclosed in writing, and, if you want it, you must agree to it and sign for it.
Credit Limit
The maximum amount of money that may be borrowed on a loan account, or the maximum amount allowed you can charge and owe on a credit card account.
Credit Rating
A rating determined by a rating agency of the likelihood that a borrower will be able to repay its debt.
Credit Report
A document used by the credit industry to examine an individual's use of credit. Your credit payment history is recorded in a file or report. You have a credit record on file at a credit bureau if you have ever applied for a credit or charge account, a personal loan, insurance or a job. Your credit record contains information about your income, debts and credit payment history. It also indicates whether you have been sued, arrested or have filed for bankruptcy. These files or reports are maintained and sold by consumer reporting agencies (CRAs). One type of CRA is commonly known as a credit bureau.
Credit Score
A computer generated number that summarizes an individual's credit profile and predicts the likelihood that a borrower will repay future obligations.
Creditor
A person, bank, business or other organization that you can borrow money from or you can owe money to.
Creditworthy
Your ability to qualify for credit and repay debts.
Customer Service
Customer service is something most people don't consider, or appreciate, until there's a problem. At the very least, look for a 24 hour toll free telephone number when evaluating customer service.
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