Glossary of Auto Loan Related Terms

Caps (Interest)

Consumer safeguards which limit the amount the interest rate on an adjustable rate mortgage may change per year and/or the life of the loan.

Caps (Payment)

Consumer safeguards which limit the amount monthly payments on an adjustable rate mortgage may change.

Captive Finance Company

A separate company owned by an auto manufacturer to finance product sales. Examples include General Motors Acceptance Corporation (GMAC) and Ford Motor Credit Corporation (FMCC).

Certificate of Title

A certificate issued by a title company or a written opinion by an attorney that the seller has good marketable and insurable title to the property which he is offering for sale. A certificate of title offers no protection against any hidden defects in the title which an examination of the records could not reveal. The issuer of a certificate of title is liable only for damages due to negligence.

Closing

The meeting between the buyer, seller and lender where the property and funds legally change hands. Also called settlement.

Closing Costs

Includes a loan origination fee, points, appraisal fee, title search and insurance, survey, taxes, deed recording fee, credit report charge and other costs assessed at settlement. The closing costs usually are about 2 percent to 6 percent of the mortgage amount.

Cloud (On Title)

An outstanding claim which negatively affects the marketability of title.

Collateral

Property offered to support a loan that can be seized if you default.

Commission

Money paid to a real estate agent or broker by the seller as compensation for finding a buyer and completing the sale.

Commitment

An agreement, often in writing, between a lender and a borrower to loan money at a future date subject to the stated conditions.

Compound Interest

An interest method that calculates interest on interest earned in prior periods.

Cosigner

Another person who signs your loan and assumes equal responsibility for it.

Credit

The right granted by a creditor to pay in the future in order to buy or borrow in the present; also, a sum of money owed to a person or business.

Credit Bureau

An agency that keeps your credit record.

Credit Card

Any card used from time to time to borrow money or buy goods or services on credit.

Credit History

The record of how you've borrowed and repaid debts.

Credit Ratio

The ratio, expressed as a percentage, which results when a borrower's monthly payment obligation on long-term debts is divided by his or her net income (FHA/VA loans) or gross monthly income (Conventional loans). See Housing Expenses-to-Income Ratio.

Credit Scoring System

A statistical system used to rate credit applicants according to various characteristics relevant to creditworthiness.

Credit-related Insurance

Health, life, or accident insurance designed to pay the outstanding balance of debt.

Creditor

A person or business from whom you borrow or to whom you owe money.

Creditworthiness

Past and future ability to repay debts.

Customer Incentive

A special payment from the manufacturer to the customer to promote sales of slow-selling models. Also called a "Rebate".