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Glossary for Auto Loans
GLOSSARY FOR AUTO LOANS

Admininistration Fee : Unavoidable pay out by which bank/HFC can make money of you. A one time fee; generally non-refundable; payable before the loan is disbursed. Rates may vary from 1-2% of the loan amount

Advance EMI : Number of equated installment (s) out in advance ayt the time of disbursement of loan in the form of post dated cheques.

Basic Qualifier
:One who satisfies the elogibility criteria as given by the lender.

Category of Borrower : Definining the borrpwer as :

    • Salaried ,or
    • Self-employed , and also
    • Resident indian ,or
    • NRI

Down Payment : Wonder why it’s called down payment when it has to be paid up-front?Finance companies normally give loans up to 80-85% of the value of the property. The balance would have to be paid by the buyer, as a payment before he draws on the loan amount.

Eligibility : Criteria specified by the lenders to evaluate the willingness and the ability of a customer to qualify for a loan scheme.

EMI : Loan repayments are usually in Equal Monthly Installments over the tenure of the loan.

 

Estimation :Process to evaluate the worth in money of an asset/product.

Exposure : The loan amount as against the value of the asset/product.

Extent of Loan : Same as Exposure.

Flat rate of interest : Percentage representation of the amount of the annual interest on the total loan amount.

Floating rate of interest :Here the interest rate on the loan depending on the Prime Lending Rate (PLR) fixed by the Reserve Bank. This change can happen as frequently as one in six months. If the PLR falls, you benefit and if it rises... However, in case of a fall your payments remain the same for every month. The finance company will refund some of your EMI cheques and effectively compensate you by reducing the tenure of the loan. The reverse happens if the PLR rises, much to your disadvantage. Whoever said that this is a floating rate has got be joking. It’s best called the sink or ride the crest rate, wouldn’t you agree?

Interest rate : Rate at which the lenders charge interst for the loan amount.

 Invoice – rate :Ex showroom or dealership price of an asset / product.

IRR :Internal rate of interest, the rate at which the lender accounts for interest

Margin :Margin Amount is the difference between the total cost of the car and the loan amount sanctioned. This money has to be invested by the borrower prior to the release of the loan amount.

Maximum Loan amount :Maximum amount which is financed under a scheme,it is normally represented as a fixed amount or percentage of the value of the asset.

Minimum Loan amount :Minimum amount which is financed under a scheme, it is normally represented as a fixed amount or percentage of the value of the asset.

Mortgage :The security to be provided against a loan.

Mode of payment : Method of repayment of the loan,EMI or any other as per the scheme.

Net worth of the applicant : The ability of a borrower for the reapayment of the loan as evaluated by the lender as per the criteria.

Partnership :This is joint or several ownnership of a business with unlimited liability of the partners.

Proprietorship : Single ownership of a business

Processing Fee : It is a one time fee which is normally non-refundable and is payable before your loan is disbursed. The rates may vary from 1-2% of the loan amount.

Refinance : Loan/Additional loan financed on an existing asset/product

Rest :A contradictory word here as it does nothing but increase your tension. Interest rates are quotes on a daily rest, monthly rest or annual rest basis. The annual rest quote implies that the company gives you the credit for the monthly principal repayments only at the end of each year. Such loans are therefore more expensive than a monthly/daily rest loan. The shorter the tenure of the loan, the greater the effective interest rate difference will be.

Security deposit :Amount to be paid as a security against the loan.

Tenure :Period from the date of disbursement of the loan to the date of closure of the loan.

Total initial payment : The initial payment made by the customer when the asset is purchased and it also includes service charged and advance EMIs if any.

Valuation :This is evaluation of the worth of the assets in terms of money.

Total initial payment :Initial payment made by the customer when the asset is purchased and includes service charges and advance EMIs if any

 

 

 

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