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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Net Effective Income :
The gross income of the borrower, minus the percentage removed for
federal and/or state income tax.
Point-of-Sale (POS) :
The physical location at which a purchase is made by the consumer.
Additionally, a method a taking electronic payment from a consumer
without the need for a traditional check.
Prepayment Penalty :
A bank imposed fee for early payment of a loan. This penalty is meant
to protect the bank from lost income not generated from interest on
the loan.
Rate :
See Interest Rate
Refinancing :
To provide new financing for an existing loan. The existing loan is
paid with the Proceeds from the new loan. Typically the new loan is
at a lower rate, or has a longer term than the previous loan.
Service Charge :
Additionally charges based upon the completion of the defined service.
May encompass a number of different charges. Services charges may
relate to the financial aspects of processing a loan. A Dealer service
charge may include preparation of the vehicle for delivery.
Tax :
Based upon the cost of the vehicle. Contributed to the government
for continuation of services. Amount varies from state to state. Some
states also place additional taxes on certain types of vehicles. i.e.
Luxury tax for cars over a set value, "Gas Guzzler" tax
for larger vehicles and SUV's.
Term :
For a loan this is the period of time between the beginning of the
loan and the end date, at which time the balance of the loan would
be due.
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