Basic Terminology Used in Car Financing Part III
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Basic Terminology Used in Car Financing Part III [Car Financing]
May 31, 2010, 8:05 am
There are many terms which are considered basic in the process of car financing but a lot of borrowers don’t know these. It is best to have some knowledge regarding these to ensure that the financing experience goes worthwhile. Following are some of the basic terms used:
Down Payment: the money that is put down at the start of the procedure by the borrower is called as down payment. This money is deducted from the loan amount and the difference is provided to the borrower. Different companies have different requirements regarding the down payment provided in car financing. Some require twenty percent, some ten percent, some just require thousand dollars while there are lenders which provide full financing.
Upside Down: this situation occurs when the borrower owes more money to the dealer or lender than what his/her car is worth now. There have been several cases in which the interest rate was high and the borrower defaulted on the monthly payment. In some circumstances, even after making payments for several months, the borrower might not have been able to cover much loan amount (due to high interest) and as the car price goes down, the amount owed by him/her is more than the current price of the car. In this situation, the borrower has to provide more money even when the car is repossessed.
Cosigner: a cosigner is an individual who agrees to be the security or guarantees that he/she will make the payment if the borrower defaults to do so. Cosigners are required in case of low credit car financing and have a prime credit score.
