With the terminologies involved in the auto loan market on an increase, borrowers are bound to be confused. Confusion cannot be the base of any decision. Advanced Auto Loan has tried to explain certain terms for a better understanding of auto loan terminologies.
Annual Percentage Rate
APR is the interest charged on loan. APR includes not only the interest payable over the term but also other fees and charges that a lender adds to the loan.
Balloon payment is due at the end of the loan term. The intention behind making a balloon payment is to save on the interest charges.
By base price is meant the cost of the car with only the basic options.
Blue book refers to a publication of Kelley Blue Book, Inc. or one of the model references that is used to come to the value of used vehicles. The value so obtained is also known as the “Blue Book Value”. Wholesale as well as retail value of each vehicle can be obtained through this method.
Cosigner assumes responsibility for the payment of auto loan if the borrower fails to repay it.
The payment that a borrower makes upfront at the time of drawing auto loan. The amount of down payment will depend on the borrower’s credit history, amount of loan being taken and the period within which loan will be repaid.
Manufacturer’s Suggested Retail Price
Manufacturer’s suggested retail price is referred to as MSRP in short. It is the price recommended by the manufacturer for the vehicle. The price is also known as list price or sticker price.
The phenomenon of upside down or negative equity is visible when the balance that a borrower owes on an auto loan exceeds the value of car.