Glossary of Auto Loan Related Terms

Impound

That portion of a borrower's monthly payments held by the lender or service to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due. Also known as reserves.

Index-Term

A published interest rate against which lenders measure the difference between the current interest rate on an adjustable rate mortgage and that earned by other investments (such as one- three-, and five-year U.S. Treasury Security yields, the monthly average interest rate on loans closed by savings and loan institutions, and the monthly average Costs-of-Funds incurred by savings and loans), which is then used to adjust the interest rate on an adjustable mortgage up or down.

Interest

A charge paid for borrowing money.

Interest Rate

The annual rate of interest on the loan, expressed as a percentage of 100.

Investor

Money source for a lender.

Invoice Price

The price the dealer pays to buy a car from the manufacturer, exclusive of hold backs or other discounts.Very seldom is the bottom line of the cost to dealers.