Finance Terms and Loan Glossary
ACT - Usually means the National Consumer Credit Protection Act along with the National Consumer Credit Code. In January 2011, the National Consumer Credit Code was introduced
Arrears - The amount in dollars that you are behind in repayments of a set contract
Asset – A term used for something that an individual or company may own that is of any value. E.g Vehicles, Equipment, Properties etc
ATO – Acronym for Australian Tax Office
Bad Credit – When a customer has had some poor history on credit in the past. This can be with a financier, telco provider or any court judgement lodged against them. Bankruptcy will also fall under this category.
Bankruptcy – Occurs when an individual or company cannot repay their debts. A bankruptcy will last for 3 years and generally no financier will lend to someone who is currently bankrupt. Once discharged the customer can get finance but usually through something small like a Bad Credit Car Loan that will entail a higher interest rate
Balloon – A balloon is a percentage or amount owed to the financier at the end of the loan term. This is often used to reduce repayments
Business day – Means any day other than a Saturday or Sunday, or a public holiday.
CHP – An acronym for Commercial Hire Purchase or also known as a Hire Purchase
Credit Activity – It is the National Consumer Credit Protection Act that includes activity relation to mortgages, guarantees, consumer loans and leases, credit contract and other credit services.
Credit Report – A credit report is a report on any individual, company or partnership that will show any application made for finance and any negative feedback on missed payments or debts that have been left unpaid. Order a copy of your credit report here
Debt Consolidation – Is when a variety of different loans and debts outstanding are combined into the one loan. This most commonly happens when re-financing a home loan to accommodate for lower repayments.
Default – A default is listed on a credit report for 5 years. If the default is listed as a clearout or a serious credit infringement this will be listed for 7 years. A default occurs when a debt has fallen a certain timeframe behind in payments or has been left completely unpaid.
Early Termination Fee – This is a fixed fee used by some lenders if you decide to pay your loan or lease out early. This should not be confused with break coasts payout penalties.
Encumbrance – Any pledge, Lien, Mortgage or charge and any other interest over a property or asset. It is usually used to sercure a loan to a property, vehicle or piece of equipment.
Fixed Rate – An interest rate that will be fixed for the entire loan agreement. This will not change no matter what happens in world money markets.
FHOG – This is known as the First Home Owner Grant. This is a grant given to an individual for their first purchase of a home. It varies from state to state to see First Home Owners Grant for more information.
GST – Goods and services tax which is implemented on the supply of any goods or services.
Guarantor – Someone who comes onto the loan agreement to guarantee that payments will be made in any case the primary party can’t make the payments
Interest rate – Usually charged as a certain percentage per annum or per month. It is a percentage used to calculate the amount of interest charged over the life of the loan or lease.
Loan Term – is the length of time the loan or lease will go for as outlined in the schedule
Luxury Car Tax Threshold – The threshold is set at $57,466.00 for the 2011-2012 financial year. When the vehicle price exceeds this amount a Luxury Car Tax will be applied. The Luxury Car Tax is calculated at 33% of the amount exceeding $57,466.00 exluding the GST component.
Novated Lease – This is a 3 way agreement between the financier, employee and employer. The repayments are made via salary packaging which is also known as salary sacrificing. See Novated Lease for more info
Part IX (9) Debt agreement – is part of the bankruptcy act. Is one step before going bankrupt and allows the individual who has struggled to commit to their debts to consolidate all their debts into one repayments and pay it back within a set time frame. This will stay on your credit report for 7 years and will last for the timeframe specified in the agreement when you sign off on it.
Periodical Payment – A set amount paid on a set date. Usually either weekly, fortnightly or monthly.
Security – is something that the lender can take back and sell in order to repay the funds owed. In the case of a car loan, the loan is secured to the vehicle until the loan is paid out in full. This is the same case with home loans.
Security provider – Someone other than yourself offering some sort’ve security to help get the finance
Settlement – Is when the funds are advanced to the vendor or customer for the amount of credit sought.
Structured Payments – Structured payments are something usually used by businesses. For example, farmers who weep their crops at a certain time of the year may want to make an annual lump sum on their equipment finance around that time so the financier allows them to make a larger payment at that agreed time.
Tax Invoice – Is a document often used as a receipt for the purchase of any goods or services. It will outline any GST paid, the amount spent and a description for the goods or services.
Title – A title is something that will show ownership of a property of certain asset.
Total loss – Is when the goods are stolen or damaged and is deemed a write off under the comprehensive insurance policy
Vehicle Finance – is a very broad term for a range of different vehicle finance products. It is usually a Consumer Car Loan, Hire Purchase, Chattel Mortgage, Novated Lease or Finance Lease.
Vendor – The person, company, dealership or another entity that is selling the goods that you are looking to purchase and get finance on.