Driver Loans 

Common Vehicle Loan Terminology

APR: This abbreviation means Annual Percentage Rate. This is what will be charged yearly to your loan on top of the base price. Watch for a lower APR when purchasing a vehicle, because that percentage can really add up.

Base Price: This is the price you will be paying for the vehicle before finance charges and interest rates, as well as any other fees charged by the dealership.

Borrower: This is you. You become the borrower when you take out an auto driver loan, whether through your own bank or the dealership.

Buyer: The person that is purchasing the vehicle.

Collateral: This is an asset in which you use to secure your loan. If you default (fail at paying) for your auto loan, the creditor has the right to take your collateral (which in this case would mean repossessing the vehicle you are purchasing).

Co-signer/Co-borrower: If your credit isn't the best, you may be asked to have someone sign/borrow with you on your car loan. They will be responsible for the loan if you fail to pay it.

Creditor: This is who you owe the money to when you take out your auto loan. Refer also to Lender.

Credit Report: Your credit report displays your credit history. Every consumer is allowed one free credit report annually to check their credit history, as well as use that report to dispute items on their credit report.

Dealer Sticker Price: This is the amount that the dealer is asking for the vehicle.

Down Payment: A down payment is a chunk of money put toward the price of your vehicle. The more you can put down on the vehicle, the better your payments will be when you start off paying for your car. It is not always required, but if you want a lower payment on your auto loan, it is essential.

Due Date: This is the day that your loan payment is to be paid monthly. If you fail, you may be subject to a late charge that adds to the amount you will have to pay to keep your loan current.

Lien/Lien holder: When you owe money on a loan, they will place a lien on your loan, and the lien holder has to release the title for you when the loan is paid off in full by signing off their lien on your vehicle's title.

Lender: This is who will lend the money for you to have your loan. If you are borrowing from your own bank, the bank is your lender. Otherwise, dealerships have a collection of lenders that they use to borrow the money for you.

Loan Term: This is the time it will take for you to completely pay off your auto loan. Shorter loan terms equal higher payments, and longer loan terms equal lower payments. However, if you want to pay off your vehicle faster, a shorter loan could work for you.

MSRP (Manufacturer's Suggested Retail Price: This is the list price of the vehicle according to the manufacturer of the car.

Principal: This is the total amount that you have borrowed from your lender. Paying chunks on your principal lowers your balance and you payment to pay off faster, depending on how your loan is set up.

Secured Loan: Most auto loans are secured with the vehicle in which you are purchasing from the dealership. If you fail to pay for it, your collateral is taken from you and resold to try to retrieve the money you owe to the creditor. If the car does not sell for the entire amount of your auto loan, you will be responsible for the amount that is not covered by the sale of the vehicle.

Trade-In Value: This is the amount that the dealership is giving for the vehicle you are trading in on your new vehicle.