Your glossary of auto lending terms.
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ACH Automated Clearing House
An electronic transfer of funds to make payments.
Amortization and Re-amortization
Refers to the process of paying off a loan (debt) with regular payments over time. Re-amortization is a change in the regular payment amount, such as paying more toward the principal loan balance.
Amount Financed
The total amount of the money borrowed on the loan.
Annual Percentage Rate (APR)
this is the cost you pay each year to borrow money. The number includes fees and is expressed as a percentage.
Applicant/Co-Applicant
this is the person who is applying for financing with a formal application. A co-applicant is a second person who is applying for the same financing on the same formal application.
Borrower/ Co-borrower
The person who is applying for financing with a formal application. A co-applicant is a second person who is applying for the same financing on the same formal application.
Change of Ownership
When ownership of a vehicle moves from one person to another.
Collateral
an asset a lender accepts as security for a loan.
Consumer Reporting Bureau (or Agency)
an agency which collects personal information about consumers and uses that information to inform lending institutions about a person’s creditworthiness.
Cosigner
someone who takes full responsibility for paying back a loan in the event the primary borrower fails to repay.
Credit Report
a compilation of someone’s credit history. The report shows all known debt a person owes and their timeliness in repayment.
Credit Score
a numerical range between 300 and 850 that is based primarily on a credit report. The higher a person’s credit score is, the higher their chances are of qualifying for a loan.
Current Loan Balance
the unpaid principal and interest of a loan.
Debt
money a person owes to another person, institution or organization.
Debt to Income Ratio (DTI)
a personal finance measure comparing monthly debt payments to the income a person earns.
Department of Motor Vehicles
a government agency run by the state that administers vehicle registration and driver licensing.
Depreciation
refers to the rate at which your vehicle loses its value over time.
Depreciation Protection
insurance that protects your vehicle’s value in the event it is totaled in an accident or stolen.
Documentation Fee
fees charged by some companies to process your paperwork. At Gravity Lending, we do not charge documentation fees.
Down Payment
money paid up front toward the purchase of an asset such as a car or a home. Down payments are not part of the Amount Financed.
Due Date
for loans or debt this is the date of the month your payment needs to be paid by to avoid more interest charges or late fees.
FICO Score
similar to a credit score, but FICO is used by lenders to predict the likelihood that someone will pay back debt.
Finance Charge
either a flat fee or a percentage of the amount borrowed which is paid to the lender. It is the cost of borrowing money.
Finance Rate
it is the interest rate you can get financing from a lender for a loan. Rates can be fixed or variable.
Fixed Rate Loan
an interest rate that does not change. The rate of interest will apply to the entire term of the loan.
Guaranteed Asset Protection (GAP)
this is supplemental insurance coverage that would help you pay off your auto loan in the event your car is totaled or stolen. Gravity Lending provides an opportunity to purchase Guaranteed Asset Protection (GAP) when re-financing an automobile.
Hard Inquiry/Hard Pull/Hard Credit Inquiry
this occurs when you apply for a new line of credit. A hard inquiry will typically impact your credit score.
Interest Rate
is the price you pay to borrow money.
Kelly Blue Book Value
is a recognized standard to get your vehicle’s current worth.
Late Fee
a charge that is imposed for being late on a loan payment.
Lease Buyout
pays off the remaining balance of your lease agreement for a predetermined amount of money.
Lien
a legal claim against a property that is used to satisfy debt.
Loan Terms
these are the conditions that apply to your loan such as repayment period, late fees and interest.
Loan to Value (LTV)
an assessment of lending risk for a lender. It is the difference between the loan amount and the current market value.
Loan Modification
a change to the existing terms and conditions of a loan.
Maturity Date
the date the final payment on a loan is due.
MAPR (military disclosure)
a requirement that the financial institution must disclose interest rates and all fees to military members both orally and in writing.
Monthly Payment
the dollar amount you must pay to the financial institution each month to satisfy your obligation.
Non-Sufficient Funds Fee (NSF)
the dollar amount you must pay to the financial institution each month to satisfy your obligation.
Note and Security Agreement (NSA)
refers to a promissory note to repay the loan and the security agreement outlines the collateral which is used for the loan.
Original Loan Amount
the principal loan amount of the loan which was first agreed upon.
Payment Deferral
pushes out the loan maturity date by allowing a period of time with no monthly payments.
Payoff Amount
this is the amount you owe on a loan through a specific date to pay off the loan in full including any interest or fees you owe.
Prepayment Penalty
a fee some lenders charge when you pay off a loan earlier than the term of the loan.
Principal Balance
the amount of money owed on a loan without any interest, finance charges or other fees.
Principal Reduction Payment
a payment on a loan that applies to the principal balance of a loan, not the interest or fees.
Proof of Employment
a document that proves you are employed. It can be the last two pay stubs, a letter from your employer, 1099’s or if you’re self-employed a W-2.
Proof of Income
similar to proof of employment, these are legal documents which prove you have income. It can be current pay stubs, 1099’s or W-2 forms. In some cases, past income tax returns may be needed.
Proof of Insurance
a document from your insurance company showing you have valid and current insurance on your vehicle.
Proof of Residency
this could be a current driver’s license, bank statement, utility bill, property tax bill, mortgage or lease agreement that proves you live where you claim.
Refinance
getting a new loan to replace an existing one. Refinancing can include benefits such as reducing your interest rate, reducing your monthly payment or extending the life of your loan.
Registration
refers to the registration of your vehicle with the state you live in to determine vehicle ownership.
Sales/Use Taxes
refers to the registration of your vehicle with the state you live in to determine vehicle ownership.
Simple Interest Loan
applies mostly to short-term loans where interest is charged daily vs monthly.
Soft Inquiry/Soft Pull/ Soft Credit Inquiry
allows a creditor to take a look at your credit report to get a sense of your creditworthiness. Soft credit pulls do not affect your credit score.
Term of Loan
the period of time a loan has to be repaid.
Texas Department of Transportation (Texas’s DMV)
a government agency that titles vehicles and issues driver’s licenses. https://www.txdmv.gov/
Title
a legal document proving ownership of a vehicle.
Title Transfer Cost
a fee the state charges to transfer title to another owner or lienholder.
Underwriting
verification from your lender regarding your income, assets, property and debt details.
Upside Down in a Loan
when you owe more than the asset is worth.
Usury Law
a law preventing lenders from charging excessively high interest rates on loans.
Vehicle Debt Protection
voluntary protection plan designed to help you pay off debt in the event of unexpected life events preventing you from paying. Gravity Lending provides an opportunity to purchase Vehicle Debt Protection when re-financing an automobile.
Vehicle Identification Number (VIN)
a series of numbers and letters identifying your vehicle’s specific information.
Vehicle Protection Plan
optional insurance plan designed to keep your vehicle looking and running as well as the day you purchased it. Gravity Lending provides an opportunity to purchase a Vehicle Protection Plan when re-financing an automobile.
Vehicle Service Contract (VSC)
optional coverage designed to pay vehicle repairs due after your vehicle’s manufacturer’s warranty has expired. Gravity Lending provides an opportunity to purchase a Vehicle Service Contract when re-financing an automobile.
Vehicle Value
the monetary value of your vehicle.
Warranty
a written guarantee provided by the seller or manufacturer regarding the condition of the product. It refers to the terms of which repairs or replacements will be made.
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