Car Loans Glossary For Consumers
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Understanding car loan financial terms can be confusing.
Use this glossary of common car loan terms.
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Impound :
That portion of a borrower's monthly payments held by the lender or
service to pay for taxes, hazard insurance, mortgage insurance, lease
payments, and other items as they become due. Also known as reserves.
Index :
A published interest rate against which lenders measure the difference
between the current interest rate on an adjustable rate mortgage and
that earned by other investments (such as one- three-, and five-year
U.S. Treasury Security yields, the monthly average interest rate on
loans closed by savings and loan institutions, and the monthly average
Costs-of-Funds incurred by savings and loans), which is then used
to adjust the interest rate on an adjustable mortgage up or down.
Interest :
A charge by the lender, expressed as a percentage of the total amount
leant. The borrower pays this charge as payment for the loan.
Interest Rate :
Expressed as a percentage of 100, the annual rate of interest on a
loan.
Joint Account :
An account with a financial institution, such as a bank, in which
two or more people share the account. All parties involved share legal
responsibility to repay loans or debts of this account.
Lessee :
The person who signs a lead to have temporary use of a vehicle.
Lessor :
The company that provides temporary use of a vehicle in return for
periodic payment.
MSRP :
Manufacturer's Suggested Retail Price. This is the recommended selling
price for a vehicle, set by the manufacturer. Options added or removed
from a vehicle effect this price.
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