Glossary

A – B

Acceleration Clause A term in a mortgage agreement that requires the borrower to pay off the loan immediately under certain conditions. Accounts Receivable Financing Accounts receivable financing, also known as “factoring,” is a practice in which a business sells its … Read More

C

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 … Read More

D

Dealer Charges Charges for extra services or products sold by the dealer, including rust proofing, undercoating and extended warranties. Dealer Holdback Dealer holdback is an amount, typically two to three percent of the manufacturer’s suggested retail price (MSRP), that is … Read More

E – F

Earnest Money Money given by a buyer to a seller as part of the purchase price to bind a transaction or assure payment. Equal Credit Opportunity Act A federal law that requires lenders and other creditors to make credit equally … Read More

G-H

Good Faith Estimate (GFE) A disclosure that lenders must by law issue to mortgage applicants within three business days of their loan application date. The three-page GFE lists settlement charges and the terms of the mortgage. Grace Period The amount … Read More

I

Index The index is a benchmark rate used by lenders to set adjustable rate mortgage (ARM) interest rates. It is determined by market forces and published by a neutral third party. For example, the London Interbank Offered Rate, or LIBOR, … Read More

L

Lease Fee The lease fee for a vehicle is the monthly lease payment multiplied by the term of the lease. Lender An individual or company that makes funds available for borrowing. Lenders can specialize in a category of lending, like … Read More

M – N

Manufacturer’s Rebate An incentive for buyers to buy overstocked or slow-selling cars. Margin One of the components used to calculate the interest rate for an adjustable rate mortgage (ARM). The other is called the index. Maximum Loan Amount The highest … Read More

O – P

Operating Performance Ratio A company’s operating performance ratio is figured by dividing operating expenses by net sales. It is intended to illustrate the efficiency of the company’s management. Owner Financing A home loan provided to a home buyer by the … Read More

R

  Rate The percentage used to calculate the interest charge for a loan. The rate and loan amount determine the interest expense and the loan payment. Also referred to as the interest rate, stated rate or loan rate. Rate And … Read More

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