Glossary of Terms


A B C D E F G I K L M O P Q R S T V W

A

Annual Percentage Rate - The actual interest rate the borrower pays when all the costs of obtaining credit are included.

Application - A form used by a borrower to submit pertinent financial and property information concerning a borrower/mortgagor and the proposed security.

Asset - Anything of monetary value that is owned by a person. Assets include real property, personal property, and enforceable claims against others (including bank accounts, stocks, mutual funds, and so on).

B

Book Value - The value of a used auto in a specific market area. A recognized wholesale appraisal guidebook provides guidance on the auto's value at any given time. Examples of these guidebooks include Black Book, Kelley Blue Book, or NADA Guides.

C

Co-Signer - See Guarantor.

Collateral - An asset (such as an auto) that guarantees the repayment of a loan. The borrower risks losing the asset if the loan is not repaid according to the terms of the loan contract.

Credit - An agreement in which a borrower receives something of value in exchange for a promise to repay the lender at a later date.

Creditor - A person or institution who extends credit and to whom the obligation is payable.

Credit Bureau - An organization that gathers consumer credit information. There are three major credit bureaus: Equifax, Experian, and TransUnion.

Credit Disability Insurance - An insurance policy that provides protection to the borrower in the event the borrower becomes medically disabled and is not capable of making their loan payment. The insurance company will make payments on a monthly basis according to the terms of the policy.

Credit History - A record of an individual's open fully repaid and unpaid debts. A credit history helps a lender to determine whether a potential borrower has a history of repaying debts in a timely manner.

Credit Life Insurance - An insurance policy that may be purchased by the borrower to provide protection in the event of death. The insurance company may pay off the account according to the terms of the policy. This protects the borrower's estate from the liability of the debt.

Credit Report - A report of an individual's credit history prepared by a credit bureau and used by a lender in determining a loan applicant's creditworthiness.

Credit Score - A numeric assessment used to evaluate the amount of "risk" involved in a credit transaction. It involves the evaluation of credit quality based on the information provided in the consumer's application, the proposed loan structure and the consumer's credit report.

Creditworthiness - Determination of a consumer's eligibility to borrow money. This information is based on the number of accounts opened, the types of accounts, payment history and account balances.

D

Dealer Invoice - The amount the dealer pays the manufacturer for an auto.

Dealer Sticker Price - The total price of the auto. Dealer sticker price is also known as sticker price, or MSRP.

Debt - An amount owed to another.

Default - Failure to comply with the terms of a loan contract. If a borrower defaults on a loan, the lender may seize the collateral, liquidate (sell) it, and apply proceeds to the loan balance.

Delinquent - The failure to make a loan payment on time.

Department of Motor Vehicles (DMV) - A state agency that oversees the process of registering, titling and licensing autos for a particular state. The Department of Motor Vehicles is also referred to as the Department of Transportation.

Department of Transportation - Refer to Department of Motor Vehicles.

Depreciation - A decline in the value of an auto (property) over time.

Destination Charge - The price added into the dealer invoice for moving the auto from the manufacturer to the dealer.

Down Payment - The part of the purchase price that the buyer pays in cash and does not finance with a loan.

Due Date - The date in a given month that a loan payment is due.

Duplicate Title - The request by an applicant to reissue a Certificate of Title when the original has been lost or destroyed.

E

Electronic Funds Transfer (EFT) - A process that allows either the lender or the borrower to transfer funds or payments electronically between respective bank accounts.

Equal Credit Opportunity Act (ECOA) - A federal law that requires lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status, or receipt of income from public assistance programs.

Extended Warranty - A contract that covers specified breakdowns after a manufacturer's warranty expires. Manufacturers and independent companies sell extended warranties.

F

Fair Credit Reporting Act - A consumer protection law that regulates the disclosure of consumer credit reports by consumer/credit reporting agencies and establishes procedures for correcting mistakes on one's credit record.

Fair Market Value - The amount that a willing buyer would pay at a given point in time for the auto (property) in a realistic transaction.

Finance Charge - The cost of consumer credit expressed as a dollar amount.

G

Gross Income - Normal annual income including overtime that is regular or guaranteed. The income may be from more than one source. Salary is generally the principal source, but other income may qualify if it is significant and stable.

Guaranteed Automobile Protection (GAP) - A product that pays any remaining balance owed on a loan after payment of a total loss insurance claim.

Guarantor - An individual who agrees to pay the amount due (payment) and to perform all the agreements stated on the contract if the buyer fails to meet contractual obligations.

I

Installment Plan - A method of buying an auto (property) on credit and making payments at regular intervals for a specific period of time.

Insurance - The assumption of risk of another party's financial loss.

Insurance Premium - The payment made to an insurance company to cover the cost of insurance.

Interest - The cost of borrowing money, usually stated in terms of a percentage.

Interest Rate - The interest rate is a part of the annual percentage rate (APR) equation. Interest is the annual rate of return that the lender receives on the Principal of the loan.

Invoice Price - Refer to Dealer Invoice.

K

Kelley Blue Book - Refer to Book Value.

L

Late Fee - A charge assessed by a lender for payments received after a specific due date.

Lemon Law - A blanket term used to refer to various state laws that protect consumers against the purchase of an auto found to be persistently defective.

Lender - The individual or organization that lends funds to a borrower with the understanding that those funds will be repaid, with interest, based on a clearly defined schedule. It can be a bank, credit union, or finance broker offering or referring the loan.

Liability Insurance - Protection for the policyholder, up to an agreed amount, for sums payable to another for personal (bodily) injury or property damage.

Lien - A security interest in property, such as an auto, to secure the payment of an obligation.

Lien Holder - The individual or company holding a security interest in collateral to ensure repayment of a loan.

Lien Perfection - The process of ensuring that the lien holder is correctly identified on the title.

Loan - Money lent to a consumer to be repaid over a period of time.

Loan Balance - The amount owed on a loan after deducting the amount of payments made.

Loan Contract - The written agreement between a borrower and a lender that identifies the terms of the loan.

Loan Term - This is the length of the loan, usually broken down into months (24, 36, etc.). While it is true that the longer the "Loan Term", the lower the monthly payment; increasing the length of the loan to lower the monthly payment should be done with a great deal of caution as the total amount repaid will be higher due to interest accrued. It is calculated by dividing the sales price or appraised value of an auto by the loan amount.

Loan-to-Value Ratio (LTV) - A ratio used to determine the amount of money a lender will loan based on the value of the auto. It is calculated by dividing the loan amount by the Retail Value.

M

Manufacturer - The original producer of an auto. A few examples include Ford, Chevrolet, Honda, BMW, or Dodge.

Manufacturer's Rebate - Refer to Rebate.

Manufacturer's Suggested Retail Price (MSRP) - The auto sales price suggested by the manufacturer.

Maturity Date - The date on which the balance of the loan becomes due and payable.

Monthly Payment - The amount of principal and interest the borrower is obligated to pay each month.

O

Obligation - The legal responsibility of a borrower to repay a loan.

Options - Features that are added to a base model. For automobiles, examples include a sunroof, standard or automatic transmission, and bucket seats. Options are also referred to as add-ons.

P

Principal - The amount of the auto loan without the interest factored in. In other words, the amount you are financing and will be paying interest on.

Principal Balance - The unpaid balance (remainder) of a loan.

Promise to Pay - The agreement by the borrower to repay the current payment amount and date to be paid.

Q

Qualify - The ability to meet a lender's criteria for granting credit.

Quote - A price that represents the cost of a specific item, such as a loan rate, service contract, price of an insurance policy and so on.

R

Rebate - A manufacturer's reduction to the price of an auto, which serves as an incentive to buyers. May also be referred to as a manufacturer's rebate or customer incentive.

Regulation Z - A regulation that implements the Truth-In-Lending Act. It applies to all lenders and requires disclosure of credit terms.

Retail Blue Book Value - The value of a used auto in a specific market area. See Book Value.

Retail Price - The amount the buyer pays the seller for an auto.

S

Secured Loan - A loan that is secured by collateral.

Security - Assets or personal property pledged as collateral to secure a loan.

Simple Interest - A method of calculating interest due by applying a periodic rate to the outstanding balance on a daily basis. As payments are received they are applied first to the accrued interest and then to the principal amount.

T

Tax - A percentage of the final sales price that is required to be paid to local, state, and/or federal government entities.

Title - The evidence one has of right to possession. See Certificate of Title.

Trade-In - An auto exchanged for a credit amount on the purchase of a new (auto) item.

Trade-In Allowance - A credit amount given to a customer upon purchase of a new auto, in exchange for their old auto (property). This credit amount may reduce the cash price of the new purchase.

Truth-In-Lending Act - A federal law requiring a disclosure of credit terms using a standard format. This is intended to facilitate comparisons between the lending terms of different financial institutions.

V

Vehicle Identification Number (VIN) - An individual serial number assigned by the manufacturer to a motor vehicle. The alphanumeric number consists of seventeen (17) digits is located on the auto's dashboard and visible through the windshield.

Vehicle Service Contract - Insures your vehicle from a variety of repairs and unexpected problems including engine system repairs, transmission and transfer case repairs, towing and electrical system repairs.

W

Wholesale Book Value - The amount the dealership usually pays for a used auto in markets other than retail, typically auctions and broker transactions.

Frequently Asked Questions: Applying for a Loan

  • What do you need to know about me to approve me for a loan?
    We will consider your finances, your employment history and other personal creditworthiness information during the loan process.
    Details may include:
    • Your income
    • Your expenses, including monthly payments on credit cards, auto and student loans, and any other financial obligations
    • Your employment history
    • Your credit score and report
    For secured loans and home loans—home equity, mortgage refinance—we will look into the details of your property.
    We may require, for example:
    • A title search
    • Proof of title insurance
    • A property inspection or survey
    • A home appraisal
  • What information or documents do I need to complete my loan application?
    Information or documents may include:
    • Your Social Security or tax-identification number
    • Your date of birth
    • Your address history for the past two years
    • Your address history for the past two years
    • Your email address
    • Your annual income and employment information
    • A paystub(s) for the current month for you and your co-applicant (if applicable)
    • For any other property you own (such as rental property), income/rents generated
  • Can anyone apply?
    In order to receive financing from Advancial, you must be an Advancial member. If you are not currently an Advancial member, you may still complete a loan application and an Member Service Representative will contact you to discuss how you may be eligible for Advancial membership.
  • Why do you ask about my race and gender?
    Federal law requires us to ask for this information for certain types of loans. The law is called the Home Mortgage Disclosure Act (HMDA). On your application, you may choose not to provide the information.
  • Does having a co-applicant improve my chances of getting a loan?
    It depends. We will consider the credit reports, income, assets, debt and other creditworthiness information about both borrowers. If you decide to add a co-applicant, make sure you understand that person's financial picture.
  • Who can be a guarantor on a loan?
    Guarantors must be over the age of 18 and be a member in good standing with Advancial.
  • I'm not comfortable providing my Social Security number online. What should I do?
    We adhere to the industry's best practices and standards for Web security available on our site. If you prefer, however, contact us at 800.322.2709 to find the branch nearest you or apply over the phone.
  • What if I've entered wrong information on my loan request?
    You can correct it when a MSR calls you. Please note that any intentional misrepresentation ( such as of your identity, age or home ownership) constitutes fraud. We take this very seriously and will cooperate fully with law enforcement.
  • Why do you need my email address?
    If we have your email address, we can send you a confirmation when we receive your loan request. Your personal information is confidential.
  • I thought I applied but did not get a response. What should I do?
    If you received an error message, your application might not have been processed. Please call 800.322.2709 or your local branch to verify your application was received.
  • I've submitted my application. What happens next?
    In most cases, an MSR will contact you in 24 hours or the first business day after you submit your application. You may also call us to expedite your application process.
  • How much can I borrow?
    We will loan up to 125% of the purchase price plus refundable adds, (such as GAP Insurance and Mechanical Repair Coverage) for our most qualified borrowers. On used cars, we will loan up to 125% of the NADA (National Auto Dealers Association) retail value, plus refundable adds.
  • What terms are available?
    Terms vary. The most common new and used vehicle terms are three to five and a half years. New and used vehicles with values greater than $15,000 qualify for a six-year term.
  • How do I know how much I should pay for the car?
    Our loan representatives have the NADA Guide available to them, which can provide valuable information regarding MSRP for new and used vehicles.
  • What do I need to provide before I can close my vehicle loan?
    The credit union will need a copy of the buyer’s order, purchase agreement, or worksheet. This sheet provides all the information on the vehicle you are purchasing in addition to the purchase price, your trade (if applicable), plus tax, title, and license. You must also have full coverage insurance, with an effective date that matches your loan closing date, for the vehicle you are purchasing. There is a maximum deductible of $1000 for both comprehensive and collision coverage and the credit union must be named as Lien holder on the policy. Your insurance agent will need to provide a copy of a Loss Payable Statement to our office within 30 days.
  • Should I take the dealer rebate or teaser rate financing when purchasing a new vehicle?
    Applying the dealer cash rebate to the purchase price can reduce your loan amount. But it isn’t always the best choice. Don't be at a disadvantage- call and ask us to run the numbers for you.
  • How do I know if I should consider an installment loan or a home equity to finance my vehicle?
    Our team of lending professionals can help you make the right choice for your situation. Call or stop by the credit union to review your options.
For questions about a loan with Advancial or your online application, please contact your local branch or our Member Service Center.

Member Service Center
(800) 322-2709
msc@advancial.org


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