B

Balance Transfer

Balance transfer or refinance allows the borrower to transfer the remaining balance of the loan to a different lender or bank with lower interest rates and better deals at any given point of time during the continual loan period after a year of repayment history.

Binder Agreement

It is a temporary legal document provided by the insurer or an agent for the insurance provided as an agreement between both parties until a policy can be issued.

Bridge Loan

It is a short-term loan to access urgent cash requirements taken out for a period lasting from 2 weeks to 3 years.

Buy Down

A financing technique where the buyer, borrower, or the third party attempts to lower the interest rates for the first few years of the loan period by paying discount points(one-time fee) at closing.

Balloon Payment

A balloon payment is a lower monthly payment followed by a larger-than-usual final payment at maturity. 

Bankruptcy

Bankruptcy as we know is zero balance in your credit when you have an outstanding balance amount that you cannot repay. 

Bankruptcy Filing

Filing bankruptcy means discharge of debts encountered with serious legal proceedings and long-term impact on credit.

Base Value

The base price or value is the price of the vehicle without add-ons, taxes, and extra charges.

Borrower

The person, organization, or country borrowing the loan.

Buyout

Lease buyouts are when dealers allow buying your vehicle before the lease contract ends.

Buyout Amount

The buyout or payoff amount is the residual value of the vehicle stated in the agreement, total remaining payments, fees, and taxes added.

C

Collateral 

Collateral is an asset or property owned by someone pledged as security to the lender to borrow a loan. When pledged, the lender becomes the owner of the property until the loan amount is retrieved in full.

Credit Score

A credit score or Cibil score is a three-digit number that determines the creditworthiness of a person or the ability to repay debt. The score is calculated based on the personal financial data of the cardholder.

Cash Reserve

A cash reserve is a short-term money preserved in hand by an individual or an organization to meet the unplanned costs or expenses of the business. 

Condominium

A condominium or condo is defined as a building structure with several apartments or individual units, each owned separately.

Covenant

Covenant also known as a binding agreement is a mutual contract between two parties signing a lease, deed, or another legal contract.

Contingency Clause

A contingency clause or agreement is a legally binding document that when certain conditions or actions are met become valid. The clauses allow a way out for both parties to resign from the contract if one or more conditions are not met.

Curtailment 

It is an act of reducing or limiting something. In terms of the loan, curtailment is reducing the loan burden by making part payments ahead of schedule.

Comparison Rate

Comparison rates are competitive pricing including interest rates, fees, and charges relating to the loan offered by different banks or lenders.

Credit Agreement

A credit or loan agreement is a contract or formal agreement between the lender and the investor stating the transfer and borrowal of money between both parties concerned.

Creditor

A creditor or lender is a person who issues money to the investor intended to be repaid in full in the future with interest.

Co-borrower

Co-borrower is a co-owner of the loan amount. One or two people who apply for the loan together with a primary borrower become equally responsible to pay the loan amount borrowed in due time.

CUV (Crossover Utility Vehicle)

A crossover utility vehicle or crossover SUV is a vehicle combining the features of a hatchback and an SUV with midsized unibody construction.

Coupe

A coupe is a four-wheeled closed carriage with sloping rear and a luggage compartment.

Cabriolet

Cabriolets are cars with a roof/hood(usually made of leather) that can fold down.

Credit Unions

A credit union is an NPO(nonprofit organization) existing to serve its members at lower interest rates from the funds they have saved within their group.

Co-signer

Co-signer or guarantor is a person (likely a family/friend/well-wisher) who will sign on a loan application jointly with the owner to vouch for their worthiness, hence pledges to repay the loan in case the applicant will fail to take responsibility due time.

Credit Report

Credit reports hold a record or history of your credit statements made by the credit bureaus based on your previous activity and current status. This may include everything from your outstanding debts, bankruptcies, or even any negative track record.

Credit Card

A credit card is a small piece of plastic or metal card issued by the bank on a credit basis to borrow limited funds to purchase goods and repay in the future by the issued due date.

Credit Insurance

It is a type of insurance to pay off one or more debts left unpaid by the financial shock in the events of death, unemployment, disability, or even loss of property.

Creditworthiness

Creditworthiness is how the lender or a financer knows if you are worthy of a loan or new credit. It is based on your credit history, credit score, repayment capabilities, employment stability, and sometimes even your relationship with the lender.

Conversion Fee

Borrowers who have already taken out a loan but wish to sell their property and purchase a new one can opt for a conversion loan by paying a fee to avail of the conversion. 

D

Debt

Debt is the money owed by the investor to the lender or any outstanding payments on the borrowed sum from another person or a party.

Debt Consolidation

Debt consolidation is the act of combining multiple credit accounts or loans into a new loan to pay off the debts.

Defaults

Default is a failure to meet the required legal obligations of a loan by the investor or borrower unable to make the payments in due time.

Debt-To-Income Ratio

DTI determines the borrower’s debt capacity for monthly repayments. It is the ratio of the monthly gross income divided by monthly debt payments to determine the money earned per month and the money going into clearing debts.

Delinquency

It is an act or situation in which the amount borrowed as a loan is not returned as agreed.

Deficiency Balance

It is the outstanding amount to be paid to the creditor at the time when the vehicle is repossessed by the lender. The vehicle is thus sold at an auction to recoup the remaining principal balance that the borrower failed to repay.

Depreciation

Depreciation is the decrease in the value of the car from the time it is purchased to the present time. It is calculated over several other factors including age, resale value, mileage, and wear and tear of the car.

Diminishing ROI

In diminishing ROI, the interest rate will be charged on the outstanding amount (initial principal – paid principal amount), not on the initial amount. 

Down Payment

It is the initial payment made at the time you purchase something in a percentage smaller than the total amount to be paid. It is also called a partial payment for something bought on credit.

Disposition Fee

A disposition fee or turn-in fee is a fee charged at the end of a lease contract, collected to prepare the vehicle for the next buyer.

E

Equity 

Equity is the actual worth of the vehicle or the resale value minus the amount you owe on the auto loan. 

Eligibility Criteria

Eligibility criteria are written in a set of conditions in which if the borrower or the investor fails to meet will be rejected of the loan on application.

Entitlement

Entitlement is a legal privilege or right to benefits or assets you own as an individual or a party.

Easement

A binding agreement or contract between both parties involved in granting access to land or property of another for a particular purpose without possessing it.

ECOA (Equal Credit Opportunity Act)

ECOA is civil law protecting discrimination against race, gender, age, wealth, or welfare status of the borrower by the creditor or lender with no regard to the set eligibility criteria by the organization.

EMI (Equated Monthly Installments)

An amount of money paid every month by the borrower to the lender for a predetermined period with interest to repay the loan borrowed.

Extended Warranty

It is a warranty contract extended over the initial manufacturer’s warranty on the vehicle at the time of purchasing a new car. Any repairs, defects, and even replacements are covered within the warranty over the mentioned span.

F

Fund

A fund is the sum of money allocated for a specific purpose.

Fair Market Value

It is the fair rate/price at which the vehicle is traded between two parties sharing common knowledge in the open market without being under pressure.

Finance

Finance is the procedure of managing a large sum of money, such as raising funds for borrowing, lending, or investing to purchase any asset.

Fixed ROI

Fixed Interest rates offer interest that does not change with the market value. Even with variable market conditions, the loan is set to remain the same throughout the loan tenure.

Flat ROI

Flat rate interest is a rate of interest charged on the initial principal amount instead of the outstanding payment.

FOIR (Fixed Obligation to Income Ratio)

FOIR allows you to consider your monthly income, requested loan amount, and current liabilities, to determine your repayment capacity and loan eligibility by financial institutions while lending loans.

Front End Ratio

Also known as mortgage to income ratio is a percentage indicator at which an individual’s income is calculated against the allocated mortgage.

Foreclosure

It is a process in which the lenders can legally recover the remaining borrowed sum from the borrower if he/she fails to repay their debts in due time by forcing the sale of the vehicle(asset) in case of an auto loan.

G

GST (Goods & Service Tax)

A tax stated by the Indian Govt. was imposed on the supply of goods and services.

Gross Income

It is the total amount earned by the individual without tax or other deductions included.

GAP Insurance (Guaranteed Automobile Protection)

It is a type of add-on coverage for automobile insurance to protect the owner from any loss if incurred.

Gift Funds

Free funds are assisted by some organizations or third-party services to assist with down payments.

Gift Letter

For a gift fund received by a family, friend, or a well-wisher the applicant needs to submit a gift letter stating the mutual agreement of both parties involved in an exchange of funds and thus agreeing to not receive any repayment in return for the fund. This will help the creditor to calculate the debt-to-income ratio of the applicant concerning the remaining balance amount.

GEM (Growing Equity Mortgage)

An escalating mortgage is a type of loan where payments increase over time with the extra money applied to the principle of the loan to pay it off faster.  

GPM (Graduated Payment Mortgage) 

GPM involves an increase in repayments over time with lower payments in the initial stages of the loan.

Grace Period

This is a grace period during which a borrower who has not paid the fee on or before the monthly due date will not be subject to penalties.

H

Hard Credit Check

A hard credit check or inquiry is when a lender or creditor checks your credit score before approving a loan or credit. This can lower your credit score by a few points, so it’s important to be careful when applying for credit.

Hatchback

A hatchback is a type of car with a rear door feature that opens upward where luggage or extra goods can be stored.

Hybrid Mortgage Loan

A hybrid loan is a type of home loan that combines features of both fixed-rate and adjustable-rate mortgages. Hybrid loans typically start with a fixed-rate period of three, five, or seven years, after which the interest rate adjusts annually.

Hypothecation

When a borrower takes out a loan using their vehicle as collateral, this is called a hypothecated loan. The lender becomes a lienholder on the vehicle instead of the borrower, which means they have a legal claim to the vehicle if the borrower fails to repay the loan.

I

Insurance

It is the protection coverage provided by a company to retrieve money in case of any loss on the commodity or asset purchased.

Insurance Premium

While the insurance covers any loss on the vehicle or any other asset obtained, a premium is what you pay monthly or annually to cover these losses in the future.

Indirect Financing

Indirect financing deals with an intermediary who is partnered with the lenders and will take care of your financial needs via a third party.

Invoice

A bill or statement that records the prices of the goods and services provided and the costs incurred for each is called a time-stamped bill.

Interest Rate

The interest rate is the percentage of the loan amount that the lender charges on top of the principal amount borrowed. Interest rates can vary depending on the lender, and are affected by several factors.

Installment

It is a total amount paid on a fixed basis equally distributed through an agreed period.

ITR (Income Tax Returns)

ITR is a form submitted by an individual or an organization to the income department declaring the income and taxes payable during the financial year.

J

Joint Loan

A joint loan or shared loan is taken by two people, a co-borrower and a primary borrower sharing the ownership of the loan and responsibility to repay the sum in due.

L

Liability

It is an obligation or responsibility of an individual over the possession of an article or asset.

Line Of Credit

A line of credit is an individual, public, or private credit facility that helps a customer get funds when they need them.

Late Fee

It is a charge or penalty that must be paid by the borrower or the consumer who fails to make their payment in due time.

Loan Deferment

The deferment period is a time during which a borrower does not have to pay interest or principal on a loan. This period is typically agreed upon when the loan is first taken out, as with a student loan.

Lifetime Cap

There is a limit to the amount of interest that a borrower may have to pay over the life of a loan, known as a lifetime cap or a maximum interest rate.

Lock-In Period

The lock-in period is the time frame during which an investment or the invested amount cannot be sold, redeemed, or withdrawn.

LTV (Loan-To-Value Ratio)

LTV is a creditor’s or lender’s measure to forecast/predict the net profit amount by calculating the loan borrowed by their customer against the actual value of the asset purchased.

Lease

A lease is a contract or agreement signed by two parties. One renting an asset, another lending the asset. It grants the new owner temporary possession over the asset until the loan is repaid in full.

Limited Warranty

Limited warranty restricts or limits the warranty issued to only specific parts under certain conditions.

Lien Holder

A lienholder is a lender, an individual, or a party that claims a hold on your property until the loan is repaid in full.

Loan

It is a sum borrowed by an individual from a person or a party promising to repay in the future with an interest rate.

Loan Contract

It is an agreement document signed by the parties involved in the loan process to fulfill the requirements.

Loan Maturity

It is the loan expiry date or due date at which the borrower is expected to pay the loan in full. Once fulfilled, the borrower is retired from the previous agreement and is known to have closed the loan successfully. 

Legal Assessment Fee

The legal assessment fee is a fee charged by credit associations on the total of your monthly sales for each credit card brand owned by an individual to cover the costs or charges associated with processing the credit card transactions.

M

Mortgage

A mortgage is a loan product typically used by homebuyers to finance the purchase of a home, but can also be used to purchase other types of real estate.

Mortgage Margin

The mortgage margin is the percentage of the interest rate that is added to the index value to determine the interest rate for an adjustable-rate mortgage (ARM).

Memorandum

A memorandum is a brief or short written report that is specifically tailored for a person or group of people containing information regarding a specific matter.

Make & Model

Make is the brand of the car, and a model is a serial number or a name added to the series of vehicles. For example, Nissan Micra is a car where Nissan is the make and Micra is the model.

Marketplace

It is an open place where the experts in the industry come together to sell their products or services.

MCLR (Marginal cost of funds)

It is the base or minimum lending rate below which the banks are not permitted to grant loans. For banks in India, MCLR is 7%.

MCLR rate

MCLR rate is subject to change depending on financial market conditions.

Mileage

It is the number of miles or distance traveled.

MSRP (Manufacturer’s Suggested Retail Price)

The MSRP is the base value or retail price of a vehicle without any added charges, taxes, or features.

MUDRA

MUDRA (Micro-Units Development and Refinance Agency) or PMAY is an Indian govt initiated scheme to offer financial help for non-farming or non-corporate micro and small organizations.

MODT (Memorandum For Deposit Of Title Deed)

MODT is a loan agreement in which you pledge your property (title documents) as collateral or security for the loan with free will.

N

Notice Of Default

A notice of default is a formal legal notice filed with the state court that the borrower has failed to make mortgage repayments. This notice is the first step of the foreclosure process.

NBFCs

Non-banking Financial Companies or NBFCs are entities principally engaged in providing financial services without a government-acquired banking license. Aditya Birla, Bajaj Finserv, Mahindra & Mahindra, and Muthoot, are some of the many examples of NBFCs.

NOC Letter

No objection certificate (NOS) is a legal document offered by the bank or the financier upon closing a loan.

Negative Equity

Negative Equity is a drop in the value of the car you own compared with the remaining balance on your loan you still have left to pay to the bank.

Net Worth

The value of what a person or company owns, minus what they owe, is their net worth.

No Credit Check

The policy of no credit checks means that the lender does not take your credit score into account when deciding on your loan. This can be beneficial for those with poor credit scores, as they may still be able to get attractive deals on their loan. Usually, you can use your car as collateral against the loan amount, which can help to get lower interest rates and zero down payments.

O

Owner Financing

Owner financing is a direct transaction between a seller of the property and the individual or entity buying it, in which the purchase is financed either in whole or in part by the seller.

Origination Fee

An origination fee is a charge assessed by a lender for processing a new loan application. This fee compensates the lender for the work involved in evaluating and approving the loan.

OEM(Original Equipment Manufacturer)

OEM is a company or organization that produces goods like parts or components of the vehicle that are marketed by another company in their end product.

P

Penalty

Penalties are fines levied on the vehicle in cases of overspeeding or driving without proper documents needed at the time of the driver being questioned for the vehicle and individual proofs on the car. And the penalty on the loan is applied when the debts are not cleared in due time.

Part-Payment

If you are unable to pay the full amount owed to the lender, you may be able to arrange for a partial payment. Some companies will accept other goods or products instead of the remaining payment. Be sure to check with the lender’s terms and conditions before applying for a loan.

Part-Payment Charges

Varying from bank to bank, some banks may charge 2% of the total amount to be part prepaid and others zero charges. 

Pre-Approved Loan

Pre-approved loans are typically pre-qualified loans sanctioned to a borrower even before he/she purchased the car upon the fulfillment of the eligibility criteria of the bank or the individual based on the buyer’s financial stability and credit report.

Principal Amount

The principal amount is the original loan borrowed from the lender without interest rates, taxes, or extra charges.

Private Mortgage Insurance (PMI)

PMI is insurance that a borrower is required to buy as a condition of a conventional mortgage loan.

Prime Loan

Prime refers to a classification of borrowers, rates, or holdings in the lending market regarded to have great quality that any financial institution can have.

Promissory Note

A promissory note is a signed, legal document that obligates the issuer to repay a specified amount of money to a payee at a predetermined date or on demand.

Property Tax

Tax levied on the property owned by an individual or an organization by the government.

Purchase & Sale Deed

It is a legal contract or document proof obtained when you buy or sell a property showing the transfer of title and ownership of the asset from the seller to the new buyer of the property/asset. 

Processing Fee

Payment processing fees are fees charged to merchants by financial institutions for the acceptance of credit cards and electronic payments from customers.

Positive Equity

Positive equity is when the resale value of the vehicle exceeds the principal amount on the loan taken.

Prepayment

Prepayment is when the borrower decides to pay the loan amount before the due date.

Prepayment Charges

A prepayment fee is charged by the lender to the borrower if they pay the loan amount well before the due date since the lender cannot anticipate if the customer has paid or paid off with the variable interest rate that may go up or down at the time of the due date.

Preclosure

It is the repayment of the entire loan amount before the end of the term/tenure by the borrower under mutual terms and conditions agreed by both parties.

Preclosure Charges

Many banks or financiers charge a fee for the preclosure process since paying off the amount before the end of the term may result in repaying less depending on the variable interest rates. The fee could be anywhere above 4% depending on the bank.

Q

Qualifying Ratio

It is a method in which the lenders or creditors calculate whether the consumer or investor can repay his/her loan in due time.

Quote

The vehicle quote has the details on the vehicle including make, model, sticker price, offers, charges, add-ons, and the estimated total amount for what the owner is paying and where the money is going.

R

Rebate

Rebates or incentives are discounts made on the vehicle by the manufacturer to boost sales.

Refinance

Refinancing allows you to transfer the balance of the current loan to another lender or modify and replace the terms of the current agreement under better conditions.

RC Book

Registration Certificate/Card or RC book is a legal proof document issued by the Indian govt. to certify the registration of the vehicle with the RTO(Regional Transport Office)

Recourse Loan

A recourse loan gives special power to the creditor or lender if in case the borrower may fail to repay the loan. The special power exercises the ability to recoup the balance by seizing the buyer’s possessions or income.

Residual Value

It is the estimated value of the vehicle at the end of the lease

Retailer

Automobile retailers sell car parts or components to all parties alike. Consumers and private party repair owners can buy these accessories at the store or online.

Retail Price

The retail price or MSRP is the same. It is the sticker price on the vehicle recommended for selling the vehicle.

RTA Agent

Registrar and transfer agents are mediators between investors and financiers who help both parties to manage, maintain and transfer documents safely.

RTO

RTO or regional transport office is a government organization managing all transport-related activity in India. The RTO registration is however taken care of by the dealer or a third-party marketplace when you buy a car.

Rescission Agreement

It is an act of canceling the contract between two parties when performing a material breach to dissolve legal ties. 

Residual Income

The leftover cash or income after all the debts have been paid or cleared by an individual or a company.

ROI (Rate Of Interest)

The interest rate or ROI is the percentage of the loan amount that the lender charges on top of the principal amount borrowed. Interest rates can vary depending on the lender, and are affected by several factors.

Repayment History

Repayment history or credit history is the history of recorded payments during the span of a specific period within which the borrower has successfully or unsuccessfully paid his debts.

S

Subprime Loan

Subprime auto loans are offered by lenders to investors with low credit scores and rough credit history; with interest rates higher than prime rates, depending on the agreement and relationship with the lender.

Stamp Duty

It is the tax levied by the government in the course of action when transferring assets or property to a new owner.

Secure Loan

A secure loan is a type of loan where the investor pledges the vehicle as collateral or security to the lender in return for the loan amount until paid in full.

Security Deposit

If a car is rented, the security deposit is the amount paid by the customer as a deposit to the rental company. To cover any liability, unexpected charges, or damage caused by the render during the possession, the lender may use this sum.

Sedan

Sedans or saloons are traditional car models and 4-door passenger vehicles with a roof extending down the trunk of the car.

Settlement Figure

The total amount of money to be repaid to clear the full loan borrowed with interest.

Simple Interest

A simple interest loan is only based on the principal amount, unlike compound interest where interest on the principal is added to any other interest that has been aggregated over time.

Sticker Price

Sticker price/MSRP/Retail price is the manufacturer’s recommended price on the vehicle.

SUV(Sport Utility Vehicle)

Sport utility vehicles or SUVs are less heavier and much more refined than trucks, designed to look like station wagons. They are highly capable of long journeys and more able in managing higher payloads on the vehicle.

Soft Credit Check

Soft pull or soft credit checks are inquiries made to review credit reports without hurting your credit score.

T

Truck

A truck is a type of vehicle used for the transportation of goods in large amounts.

Tenure

Tenure or term is the period in which the repayment of your loan should be cleared. It is usually 1 – 7 years on a new car and 1 – 5 for a pre-owned car. 

Third-Party Marketplace

Third-party marketplaces are mediators or intermediaries bringing together the vendors and service providers from a particular industry onto a single platform.

Top-Up Loan

It is an extra loan option on your existing loan, whether home, auto, or personal.

Trade-In

Trade-in vehicles are the exchange vehicles that you bring to a dealer or an individual when purchasing a new car. You can get the new car at a reduced price in exchange for the old one. This you can use to either fill down payments or reduce the total price of the vehicle.

Trade-In Allowance

It is the amount reduced in the trade value of the new car in exchange for the old one.

Transfer Tax

Transfer tax is levied by the government upon the transfer of the title and the ownership of an asset or property to the new owner.

Title Deed

A legal deed or proof document showing the successful ownership of the property.

U

Unsecured Loan

An unsecured loan needs no security asset in return for the loan amount. As a result, the lender may increase interest rates and steer his requirements depending on the mutual relationship of both parties concerned.

Underwriting Fee

Underwriting fee, also known as commission, discounts, etc is a fee charged by the underwriters to determine the risk or price of a particular security in the market.

V

Variable Interest Loan

Variable loans or interest rates are the interest rates that are subject to change at any given time under market conditions.

Vehicle Identification Number (VIN)

VIN is a unique code or number assigned to your vehicle to make its identification faster and easier. 

Vehicle Registration

This is the ownership of the car registered in the presence of a government official. When the vehicle is purchased, the owner should change the title of the car to his/her name and include the financier if required to show proof of possession.

VSI Insurance

The vendor’s single interest or VSI insurance is a lender’s protection against the lender if it may be damaged or destroyed under any given circumstances before the loan is cleared.

W

Warranty

A warranty on a car will ensure that the company or dealers may service, repair, or replace without any added charges to the vehicle owner if the vehicle fails prematurely before the end of this warranty period. You can also extend your warranty period at the time of purchase

Wholesale Value

It is the price at which manufacturers sell their vehicles to dealers. This price will go up when the dealer sells the vehicle again to the customer to bank the profits.

Working Capital

Net working capital or capital is the financial metric that measures the overall efficiency of the organization against its financial conditions and liquidity levels in terms of cash, inventory, etc. Simply put, it is an organization’s current liquidity/assets against the existing liabilities.

Y

YSP (Yield Spread Premium)

The yield spread premium (YSP) is a type of commission that a mortgage broker or a dealer receives from a lender for selling a loan to a borrower with an interest rate that is higher than the creditor’s par rate.

Z

Zero Balance Savings Account

A zero-balance account is a type of savings account where the account holder is not required to maintain a minimum balance. This type of account can be useful for individuals who want the flexibility to choose how much they save.

Zero Emission Vehicle

ZEVs are environment-friendly and do not release any pollutants into the air.