Auto Loan Terms

**Annual Percentage Rate (APR)**: The annual rate charged for borrowing, expressed as a percentage that represents the yearly cost of funds over the term of a loan. This includes interest and other fees.

**Auto Loan**: A personal loan to purchase a vehicle. Typically, the vehicle is used as collateral for the loan.

**Bad Credit**: A term used to describe a low credit score due to missed payments, high debt levels, or other credit-related issues. Individuals with bad credit may find it more difficult to obtain loans at favorable terms.

**Credit Score**: A numerical expression based on a level analysis of a person's credit files, representing the creditworthiness of an individual. Commonly ranges from 300 to 850.

**Collateral**: An asset that a borrower offers as a way for a lender to secure the loan. In auto loans, the vehicle itself often serves as collateral.

**Cosigner**: A person who signs a loan agreement with the primary borrower, agreeing to repay the loan if the borrower defaults. Having a cosigner can help individuals with bad credit secure a loan.

**Debt-to-Income Ratio (DTI)**: A measure of an individual's monthly debt payments compared to their gross monthly income. Lenders use this ratio to assess a borrower's ability to manage monthly payments and repay debts.

**Default**: Failure to repay a loan according to the terms agreed upon. Defaulting on a loan can severely damage a borrower's credit score.

**Down Payment**: An initial payment made when something is bought on credit. For auto loans, this is a portion of the total vehicle price paid upfront.

**Interest Rate**: The proportion of a loan charged as interest to the borrower, typically expressed as an annual percentage of the loan amount.

**Loan Term**: The length of time over which the loan is scheduled to be repaid. Auto loan terms typically range from 24 to 84 months.

**Principal**: The original sum of money borrowed in a loan, or the remaining balance of that sum, excluding interest.

**Refinancing**: The process of replacing an existing loan with a new one, typically with better terms such as a lower interest rate.

**Subprime Loan**: A type of loan offered to individuals with poor credit scores. These loans often come with higher interest rates due to the increased risk to the lender.

**Title**: A legal document establishing ownership of a vehicle. When a loan is used to purchase a car, the lender typically holds the title until the loan is fully repaid.

**Underwriting**: The process by which a lender evaluates the risk of lending money to a borrower. This involves assessing the borrower's credit history, financial situation, and the value of the collateral.