Car Loan Words Explained

Car Loan Words

Meaning

Account Keeping Fee (AKF)

Monthly fee charged by the lender to manage a loan.

Balloon

Similar to a deposit, which is paid at the beginning of a loan term, a balloon payment is made at the end of a loan term.

A borrower agrees to pay a sum of money upon completion of a loan term in order to reduce the scheduled repayments.

A balloon payment is also known as a ‘residual’.

Bankruptcy

Determined by a legal proceeding, the status of bankruptcy refers to an individual or organisation no longer having the ability to repay debts.

Bankruptcy can be voluntary or involuntary. Bankruptcy normally lasts for 3 years and 1 day.

Case by Case

Describing how loan applications are assessed by lenders.

Assessing teams take an individual’s circumstances into account, therefore loan outcomes are typically case by case.

CoC

Certificate of Currency

A document from an insurance company confirming specifics of a policy. (eg. names, vehicle details).

Commitments

A financial obligation or payment with a future due date. For example, a recurring bill like a phone bill.

Comparison Rate

The interest rate of a loan including all fees and charges.

A comparison rate typically appears higher than an interest rate.

Credit File / Credit Report

Often digital (PDF), these reports display an individual’s credit history.

The reports contain personal information, past credit application and repayment details and outstanding debts a borrower might have.

Credit reports are a critical component of loan assessment.

Credit Score

A score (usually from 0-1,200) rating someone’s credit history. A higher score often means a higher chance of approval and possibly higher loan amounts.

Missed repayments and / or multiple loan enquiries, among other things, can lower a credit score.

Debt Consolidation

A loan taken out to pay off other loans. This will typically allow the borrower to pay less each repayment cycle, but over a longer loan term.

Default

A missed payment on a loan after it’s been considered only ‘late’ by a lender.

Financials

Financial documents, for example bank statements.

Interest Rate

The interest rate of a loan excluding all fees and charges.

ITR

Individual Tax Return

Loan Term

The duration of the loan, generally in months or years.

NOA

Notice Of Assessment

A document issued by the ATO detailing a tax payer’s previous tax return. Also listed is taxable income and the amount owing or refundable.

Pay Day Loan

A small cash loan, typically $2,000 or less.

PAYG

Pay As You Go.

The term describes an employed person who receives income from a company or organisation, typically in weekly or fortnightly pay cycles.

PAYG Summary

A document detailing payments to PAYG employees along with tax withheld.

Generally, these are similar to payslips.

Payout Letter / Payout Figure

A document from a lender detailing the exact remaining balance of a loan. This is the amount needed to completely pay off a loan.

Privacy Consent

A form that, once signed by an applicant, allows brokers and lenders to view their credit history, apply for a loan and assess their circumstances, among other things.

Servicing (a loan)

To pay back (or the ability to pay back) a loan by making the agreed regular repayments.

Tiering

Categories specified by lenders that borrows fall into.

Property-backed, full-time employed borrowers with good credit history purchasing new vehicles for example will typically fall into higher tiers.

Vendor

The term used for the seller of the car, generally for a private sale.

VIN

Vehicle Identification Number

A unique code consisting of 17 digits stamped onto vehicles. The code displays build date, make/model, country of manufacture and unique serial code.

YTD

The accumulative total since the start of the start of the financial year

Zero Interest

A type of loan offered under specific conditions and requirements where no interest is charged.

Lenders derive income from fees, charges or sale of an asset.