Glossary – Title Loan Terms and Definitions

Prepayment Penalties

Some lenders, but not all, will charge a fee for borrowers to repay their loan before their loan term ends. These are known as prepayment penalties, which can hinder a borrower’s ability to repay the loan. Before a borrower signs a loan, a lender will include a clause in a loan agreement that will cover any existing prepayment penalties. It can be wise to review these before signing a loan contract, so that prepayment can be possible without the stress of any extra fees.

How Do Prepayment Penalties Work?

Prepayment penalties are generally based on a percentage of your principal loan. Your principal balance is what you owe the lender, and the interest rate is what your lender will charge for allowing you to borrow funds. Some lenders will choose to include a prepayment penalty to protect themselves from a prepayment risk. This simply means the fee will act as a security to the lender, in case there is loss of interest payments with the loan that would have otherwise have been paid over time. If a borrower chooses to refinance their loan early into the loan agreement, that can result in a huge loss for the lender. Prepayment penalties are generally a way for a lender to recoup profit if there is a lower interest rate.

Lenders that choose to incorporate such fees are required to disclose the prepayment penalties before your loan contract is signed. Penalties cannot be included in the loan agreement without the informed consent of the borrower. The Truth in Lending disclosures can help protect borrowers from unfair lending practices. Under federal law, borrowers are protected, and lenders are responsible for making sure that the prepayment penalties are clearly defined in the loan contract. Personal loans, auto loans, and mortgage loans are all types of loans that will usually have a prepayment penalty from a lender.

What are the types of Prepayment Penalties?

The prepayment amounts will generally vary by the type of loan you are taking out, as well as the lender you choose. A prepayment penalty will often be based on a percentage of your loan, but they can often vary based upon your lender.

For example, a borrower may try to refinance a loan a year into the loan contract that has a remaining balance of $10,000. The lender may choose to include a prepayment penalty of 4% if the loan is paid early. This means that in order to refinance, an additional fee based on that percentage will need to be paid as a result of the loan terms.

The length of the loan term that you have will affect the prepayment penalties as well. The longer you are into your loan term, the less severe the prepayment penalties can be.

What to Look out for if Your Loan Has a Prepayment Penalty

If a prepayment penalty is included in the clauses of your loan, there are a few questions to consider:

What are the exact terms of penalty?
Does it only apply to full or partial prepayment?
How much are the penalties?

Before signing your loan agreement, these are questions that borrowers should consider.

Rollover

While the term “rollover” may have different contextual meaning in terms of finance, it has a specific meaning for a title loan. A rollover refers to the actions a title loan lender can take when a borrower is at the last few months of a loan term, and needs another car title loan or an extension on their existing one to avoid default on the current loan. The last few payments are rolled over to the new loan, with a new loan term and interest rates. If a borrower is concerned that they may default on the loan, meaning they can’t pay off the loan in the time period in the contract, the lender may offer to “roll over” the loan into a new loan.

What are the advantages of a Rollover?

Choosing to have a lender rollover a loan can be advantageous for a few different reasons. A rollover can allow a borrower to avoid defaulting or refinancing their current loan. Rolling over a loan can also prevent a borrower from a late payment that could hurt their credit score in the long run. Choosing to rollover can also allow for a borrower to have more time to gather funds to complete the repayment of the loan, which can help a credit score. Repaying a loan in full will reflect positively on a credit report.

Most lenders will give you a loan period, which is your time to repay the loan in full. Generally, that is anywhere between 30 days to 3 years depending on your lender and the state you reside in. If you are worried you may default on your loan or cannot make the payments by the time the loan period ends, a rollover can be one of your better options to consider. A rollover could potentially mean different loan terms that could be more advantageous for your current financial situation.

What are the Potential Disadvantages of a Rollover?

While there are advantages to consider with choosing a rollover for your loan, there are disadvantages as well to keep in mind. Some lenders will potentially include a fee to rollover your loan. While not every lender will choose to include a rollover fee, it is something to keep in mind when considering your options. When asking a lender to rollover your loan, consider any additional interest charges that could accrue. Rolling over a loan is a useful tool to help keep your payments on track, but it also means you will be paying more interest in the long run.

When Should I Rollover My Loan?

When a borrower signs a loan contract, there are specific set terms that define how soon the loan should be repaid. Both parties, the lender and the borrower, sign the agreement. If a borrower is unable to make the loan payments in the agreed upon loan terms, there is the possibility of defaulting. This means missed payments that could result in vehicle repossession if it is a title loan. In this case, a rollover can be the right option to avoid loan default and other additional negative consequences. Choosing the right time to rollover is negotiable, but it can be helpful if the interest has been paid off and there are just a few payments left.

Pink Slip

A title loan can be called a few different names depending on the lender and the state you reside in. They are often known as auto equity loans, auto title loans, or pink slip loans. The word pink slip simply means the title to your vehicle. This document identifies the car, as well as provides information about the owner of the vehicle. Pink slips are designed to provide information legally to different parties, such as lenders or the Department of Motor Vehicles services. In the state of California, the title document for some vehicles is pink- therefore the vernacular name “pink slip” was created.

How Do Pink Slip Loans Work?

While every state has different laws and lending practices regarding pink slip loans, there are general statements about pink slip loans that can translate across states. Pink slip loans are designed to help borrowers use their car title to obtain fast cash! This is done by allowing a borrower to use the title of their vehicle as collateral for the loan. The collateral will act as a form of security to the lender, so they are able to borrow large amounts of money that they often would otherwise be ineligible for. Pink slip loans can be a way for those with poor credit history to obtain funding. Traditional personal loans from a bank or credit union will often require a borrower to have an excellent credit score to apply. Often, a low credit score will mean they are rejected from a loan, or given a high interest rate that makes it difficult to repay. With a pink slip loan, however, eligibility is not solely based on credit score. Instead, most lenders for pink slip loans will rely on the value of a borrower’s vehicle and their ability to repay the loan. Title loans, or pink slip loans, can be one of the most advantageous type of loan for those from all types of credit histories.

What are the Requirements for a Pink Slip Loan?

In order for a borrower to be able to use their pink slip as collateral for the loan, it must be in their name. A borrower must also be the sole owner of the vehicle, and some lenders will require that the pink slip be “clear”, with no liens or holds on it. A borrower cannot have more than one pink slip loan per car. In every state, borrowers will need to be at least 18 years of age or older to qualify.

Clear Title

If you are a borrower that has purchased a vehicle for cash, then the title is clear. If you purchased your vehicle and had a bank finance your loan, then you would be the registered owner, but the bank would place a lien on the title until it is paid off. A lien on a title will act as a form of security while you are repaying the loan in full. To have a clear title, you would have to have paid off the loan and have this bank removed from your title. If they still appear on the title but you have paid it off, you can get a release of the lien from the bank via a letter or they may sign on the title itself. This is considered a clear title.

Can I Get a Title Loan if I do not Have a Clear Title?

Trying to apply for a title loan without a clear title may seem tricky, but it can be quite simple through the right lender. Many borrowers may not be aware what a clear title is, but once they are, they may wonder if it can inhibit them from applying for a title loan. While some lenders will require borrowers to have a clear title to qualify for a loan, others will not. Instead, some title loan lenders will allow you to have a second lien title loan, which means you can apply for a title loan without a clear, lien free title. This is usually done when a borrower has just a few payments left on the loan balance for their vehicle, but the circumstances may be different for each borrower.

How Do I Apply for a Title Loan Without a Clear Title?

If you are a borrower in need of cash, you may wonder if there is a way to apply for a title loan without a clear title. Some lenders will allow for a second lien title loan, but there are some requirements that a borrower must meet in advance. A lender will look at how much is left to pay with the original lienholder, and how much equity is in the vehicle.

Then, they will choose repayment amounts for the money that is owed on your vehicle, so it can be rolled into a new loan. What this could potentially mean is that your title loan lender will pay off the remaining balance to your vehicle lender, and include that in your new loan contract. Your new loan contract without a clear title will have different interest rates and loan terms than the one with your original lienholder.

However, while a second lienholder is possible, the vehicle title will still need to be in the borrower’s legal name in order to qualify for a title loan. Once a borrower has repaid the title loan in full, the lender they choose will no longer be the lienholder for the loan. This means that the title is now clear! While repaying the loan, responsible borrowers that make on time payments can continue to drive their vehicle as they normally would.

Lienholder

When applying for a title loan, there may be some financial terms that seem confusing. One of these terms that isn’t used often in colloquial language is a lienholder. This term simply refers to someone who legally has the full right to the ownership of the car in the event that you may default on a contract that you may have with them. Often, your lien is one you have on your car, house, or other item of collateral. If you fail to pay your loan at a mechanics shop, you may not receive your vehicle back. This is known as a mechanics lien, which will remain on your vehicle until the bill has been paid in full.

What Happens to My Title When I Have a Lienholder?

When choosing to take out a title loan, your title loan lender will become your lienholder. This means that your vehicle is collateral for the loan, so a lien will be placed on your title throughout the duration of your loan contract. The lienholder will often hold onto a hard copy of your title as a form of security while you are repaying the loan. While the loan is being paid off, you can continue to drive your vehicle as you normally would, and the lien is removed once it has been paid in full. However, if you default on your payments and fail to communicate with your lienholder, it may result in repossession of your vehicle. While repossession with a lien is a potential consequence of a title loan, many lien holders and lenders will allow you to refinance your loan if defaulting is a possibility.

If you currently have a lien on your title, it may mean you already have a title loan with your vehicle. In most cases, you will not be allowed to have more than one title loan per vehicle. However, if you are currently financing your vehicle and that is why a lien is currently on your title, you may still be able to apply for a second lien to obtain a title loan.

How Do I Choose the Right Lienholder?

When choosing a title loan option, it is prudent to also choose the right lienholder. Some lienholders will offer high interest rates, or less than ideal loan terms. Choosing the right lienholder can make or break your loan experience! Be mindful of the loan agreement and the potential lienholder. Look for lenders that are reputable, with competitive interest rates, and helpful customer service to ensure you have a positive lending experience.

What are the Requirements to Apply for a Title Loan that Most Lienholders have?

Most lienholders that are title loan lenders will require a few things from borrowers before they can apply for a title loan. All borrowers will need to be at least 18 years of age or older to apply for a title loan. Additionally, they will require that the borrower have a title in their own name to apply, and they must have some form of proof of income. While it does not need to be a typical 9-5 to qualify, lienholders will require some form of income per month.

Refinance your Car

Title loan refinancing, or to refinance your car simply means to use a lender to renegotiate the terms of your loan contract. When you refinance your vehicle, you pay off the current loan with a new one, usually with better loan terms. Borrowers and lenders can do this for a multitude of reasons, but often refinancing can help make the loan more manageable, or reduce the interest rate on it.

One of the benefits of refinancing your car is that it allows you to work with a new lender. This could mean access to a more competitive interest rate, or more time to repay your loan.

How Do I Refinance My Car?

Refinancing your vehicle could be as easy as applying for a loan, as the process is similar. To refinance your vehicle, a borrower must choose a lender to work with. Depending on the lender, your refinancing options could vary. Refinancing your vehicle can take just three simple steps, the first being to fill out a simple application with your new lender. Then, a borrower will simply need to submit the right documents concerning their vehicle and personal information. If approved, the new loan will cover your old debt with the lender, and allow you to have completely new loan terms and interest rates.

Why Should I Refinance My Car?

Not every loan needs to be refinanced, but there are situations where refinancing can be the best option for both parties.

Sometimes a loan payment can become unaffordable due to personal financial issues, or job loss. When this happens, refinancing your car loan can be the best option. In many cases, a borrower will choose to refinance to take advantage of competitive interest rates or to reduce their monthly payment with a longer repayment term.

For example, you may have a lender that has an extremely high APR of 300%. This can make the repayment process difficult, as you will be paying off mostly interest per month instead of paying down your loan. In this case, finding a new lender to refinance with could be the better option, otherwise it will take you years to repay the loan. Choosing to refinance with a new lender that offers more competitive interest rates and manageable loan terms could help save you money in the long run. If you are currently unhappy with your loan terms, refinancing your car loan could be an option for you.

What Happens to My Credit When I Refinance a Car?

It is possible that a new loan that you acquire to refinance could temporarily hurt your credit report. However, repaying the loan on time, and closing the account once it has been paid off will help your credit in the long run. When choosing to refinance your vehicle, however, it is important to choose the right lender that can benefit your financial situation. There is no point in refinancing your loan if your new loan terms are not more optimal than your previous ones.

Kelley Blue Book

Kelley Blue Book is a company that provides the current retail and wholesale value of a vehicle. They can be conveniently accessed online, and offer a variety of services for car owners. Generally, most vehicle owners use Kelley Blue Book when they are looking to purchase a vehicle, or looking to sell their vehicle.

Loan Fee & Processing Fee

While not all lenders are the same, there are lenders that will include a loan fee or processing fee. This can change depending on the state you reside in, and the lender you are choosing for the loan.

Some lenders charge a fee for administration and processing the paperwork. Depending on the type of loan, such as a title loan, there are different fees that could be included in the initial cost of your loan. Loan origination, a loan fee, or a processing fee will help a lender cover the costs associated with creating your loan, and processing the necessary paperwork. When a borrower applies for a title loan, there are a few documents that need to be submitted in order for a loan representative to determine their eligibility.

These documents often include the title to the vehicle, proof of income, and proof of residents. Often for a title loan, a lender will ask a borrower to provide a government or state issued identification card, as well as proof of vehicle insurance. All of these items can generally be submitted online or in person, which requires an employee to analyze in order to prove authenticity. This is where the loan processing fee can originate from.

Credit Rating

A credit rating tells a lender or investor the probability of the subject being able to pay back a loan. Your credit rating scale is based upon a score that ranges between 300-850, where a score of 700 is generally acceptable or considered a good score. A Score of 800 or above is considered an excellent credit rating. The average scores are around 600-750.

Title

A vehicle title (also known as a car title) is a legal form, establishing a person or business as the legal owner of a vehicle. A title represents the ownership of the asset, which is the vehicle. A title may be called a few different names depending on the state you reside in, such as a pink slip. Titles are able to be purchased, or inherited.

Auto Pawn

Similar to a title loan, an auto pawn loan is a loan that is secured through the use of collateral. For an auto pawn loan, the vehicle is left with the car dealer, and it is returned when you pay off the loan.

Auto pawn loans can accept the collateral of a few different vehicles, including your car, truck, SUV, or even motorcycle. If a borrower repays the loan, interest, and fees within the time frame that is in the loan agreement, they will receive their vehicle back. If not, the vehicle will be sold at an auction. This does not happen often, as most lenders will be willing to work with a borrower to help prevent vehicle repossession.

Amortization

While amortization has many different financial definitions, in the case of a loan, it is simple. Amortization focuses on spreading out loan payments over time. Amortization can be a helpful way for borrowers to borrow money, as the payments are agreed upon, and scheduled at the time of the loan agreement.

Annual Percentage Rate (APR)

The annual percentage rate, or APR, is a term that is used to describe the amount of interest you pay each year as a percentage of the loan balance. In some states, there are laws that cap the APR, so the percentage is not too high. High annual percentage rates can make a loan hard or almost impossible to repay as a borrower. Generally, borrowers should look for APRs that are under a certain percentage when choosing a lender.

Clear/Clean Title

A clear title and clean title is referring to the title of a vehicle. Both clean title and clear titles have different meanings, and specify certain characteristics of the title to a financier or lender. Each definition has its own implications to the vehicle owner, and will affect the financial aspects or selling aspects of the title.

What is a Clean Title?

A clean title is referring to the vehicle’s condition. This means that the vehicle has never been in a significant accident that would deem the vehicle as totaled. If a vehicle has been totaled, it is either a junk title, or salvaged title. To be considered a totaled car, an insurance company would deem that the vehicle had acquired so much damage it is not worth fixing. The vehicle would cost more to fix than the vehicle is actually worth, so it would be deemed totalled. This makes the car a junk title unless it is salvaged and inspected again. A clean title, on the other hand, has a vehicle that has not experienced any devastating condition that would require intensive repair. Generally, clean titles are worth more than junk or salvage titles in terms of the market resale value.

What is a Clear Title?

A clear title is one that has no liens against the vehicle, and the owner is not currently financing the vehicle or paying off a loan on it. This means that the owner of the vehicle owns it free, and clear of any liens. With a clear title, there are no liens from creditors, title loan lenders, or other parties that could have partial ownership of the vehicle through a lien. If you are unsure of whether or not your title is clear, it can be easily checked if you have the VIN # to your vehicle. By going on your state DMV’s website, enter the VIN # and check the title to confirm the status. Any liens, or claims to the title will generally be present through checking the VIN #.

Collateral Loans

The term collateral loans simply means that a borrower will have an asset of value to give to the lender. This collateral is a requirement for the loan, as it acts as a form of security that the loan can be repaid one way or another. If a borrower defaults on a loan payment during the repayment period of the loan contract, the collateral could be at risk for repossession. This is only a last resort option, however. Most lenders are willing to work with the borrower to make sure the loan can be repaid first, even if it means refinancing the original loan.

Creditor

A creditor will allow the borrower permission to borrow money with the condition that it will be repaid in the future. A creditor could be any financial establishment that extends credit to borrowers, and can include businesses, credit unions, and other financial institutions. For example, if a business provides items or services without immediate demand for payment from the client, the client will owe the business money for those items or services. This makes the business a creditor. Creditors can also be banks or credit unions, and they can offer borrowers funding by offering collateral loans. If the borrower defaults on their payments or refuses to pay the loan, the creditor can legally repossess the asset.

Credit History

A borrower’s credit history is one of the most important financial aspects of their life. Credit history can determine what car a borrower will drive, what house they choose, and even where they work. A borrower’s credit history shows their ability to repay their debts, and their trustworthiness as a consumer. The history of a credit user will also disclose their projected responsibility as a borrower.

Credit Score

A borrower’s credit score is arguably the most important financial aspect of their life. Credit scores can determine the borrower’s offered interest rates, as well as what car they will drive and what house they can choose. A credit score is composed of three numbers, ranging from 300-850. These numbers are determined by a credit bureau, who use a borrower’s credit report as the basis for calculation. A credit score will determine a borrower’s creditworthiness, which will affect if a lender or creditor will loan to them. Lenders use credit scoring as a way to determine a borrower’s responsibility as a borrower, and if they will default on their loan.

Default

When a borrower takes on a debt through a loan or loan agreement, there is a financial obligation to repay the debt. Failure to do so, including the interest or principal on a loan, is considered defaulting on the loan. Defaulting on a loan has serious consequences for your credit, and could lead to repossession if it was a collateral loan.

Disclosures

Through financial terms, a disclosure or disclosure statement is the information that a company releases to their customers, or investors. Disclosures are legal statements that help give the customers accurate information about their loan, their lender, and other aspects of their loan decision. Disclosures are heavily regulated and enforced by the Securities and Exchange Commission, so both parties involved in the financial aspect of lending have access to accurate information.

DMV

The DMV, or Department of Motor Vehicles is a government agency with the responsibility of handling and processing information regarding vehicles in the state. Each state has their own Department of Motor Vehicles, and offers many different required legal services that have to do with vehicle ownership. While the DMV is what the department is usually called, in some states it has a different name. For example, Maryland refers to the DMV as the Department of Transportation, and in Georgia, it is known as the Department of Revenue in the Motor Vehicle Division. While the name may change, in most states, they are the departments responsible for vehicle registration and other services for the state.

Equity

Whether you are a buy or seller of a used vehicle, or looking to get a title loan, understanding equity is essential. When it comes to auto title loans and selling used vehicles, equity is simply the difference between the resale value of the vehicle, and the amount you still owe.

FICO Score

Like other methods for calculating your credit score, a FICO score is an algorithm used to analyze your credit report and formulate a score. The FICO score was originally the Fair, Isaac and Company, but is now recognized by the FICO name. Your FICO score is one of the most important financial aspects of your life, as it can control what car you drive, and even where you end up living! Understanding how your FICO score works could help you have the tools to obtain a better score.

Grace Period

A loan payment is defaulted or delinquent after 15-30 days. For some loans, a grace period could be set in place to help the borrower during tough financial times. This grace period is a set length of time after the original due date of the loan payment, and in this grace period, a payment could be made without penalty. Generally, this is anywhere from 7-15 days, and is most commonly found in mortgage or auto loans.

Interest

When a lender allows a borrower to borrow money, there is a risk involved that the borrower will not pay it back. So, the lender charges interest, as a price for using their lending services. The interest rate is a percentage of the principal of the loan. Lenders can also use interest to charge for the use of assets, which can include cash, vehicles, buildings, or consumer goods.

Repossession

When you obtain a collateralized loan, there is an asset involved. Many borrowers will choose a collateralized loan for different reasons, and many different kinds of collateral based loans exist. The most common types of collateralized loans are title loans, auto loans, real estate loans, and home equity loans.

Late Payments

A late payment is any payment that is made to a lender or creditor after the agreed upon date. Then, the payment becomes late, or delinquent. In some cases, lenders will charge a borrower for a late payment, and ask them to pay a late fee as a result. While you will often need to pay a late fee, a payment cannot be reported late to your credit bureaus until it is at least 30 days past due. Sometimes, it can be impossible to pay on time due to financial hardship or other means. Often, late payments are the result of negligence, or simply because the borrower forgot to pay. This is where autopay can help a borrower, so they will not need to constantly keep track of when to pay their debts!

Loan Amount

When a borrower is short on cash, they often look around for the right loan for their financial situation. One of the ways to choose a loan is through the loan amount, as many borrowers will need specific amounts of funding in order to alleviate their financial burden. While many different types of loans are available, a borrower’s loan amount will not be the same for every type of loan. Personal loans, title loans, and credit advances may yield different amounts of funding for the borrower.

Proof of Income

In order to apply for a loan, a borrower often will need to provide proof of income. This may not be the case for every loan, as payday loans may not always require a borrower to provide this information. However, most lenders will require a borrower to provide their income, and their paystubs or bank statements when applying for the loan.

Loan to Value Ratio

The number that lenders use to determine a risk when offering a loan is the loan to value ratio. In any market, there is a projected market value of an item. For loans that are secured with assets, the loan to value ratio will calculate the loan amount, and its relationship to the market value of the collateral for the loan. Usually, this asset, or collateral, is a house or car. Generally, a loan to value ratio is for secured loans, which are usually mortgages, auto loans, or title loans. A few major mortgage companies will use the loan to value ratio in their approval criteria.

Market Value

In terms of collateralized loans, there is always an asset involved. This asset has a price on the open market, which is known as the market value. This decided value is given by the investment community, and the market it is subjected to.

Monthly Payment Amount

With every loan, there is a specified loan amount that is given by the lender. With a loan amount, there is an estimated monthly payment for each borrower that is often set in a periodic schedule to be repaid. Each month, the borrower is expected to make that monthly payment and fulfill their debt obligations.

The monthly payment amount is decided by the lender through a calculation. It is influenced by the borrower’s income, as well as what they can afford to pay per month. Often, a lender will not loan an amount to a borrower if they cannot afford the monthly payment.

Odometer

Every time you drive your vehicle, you may see the numbers on your dashboard increase. These numbers are made to keep track of your mileage, and how many miles your vehicle has travelled. This tracking system is measured in the odometer in your vehicle, which is shown on your dashboard.

Online Title Loans

In this day and age, many things have become accessible online. Grocery orders, pharmacy orders, and other items can all be shopped for online. Title loans can also be applied for online, for borrower convenience and accessibility!

Secured Loans

There are two main types of loans: secured and unsecured. Each has their pros and cons, but there are many advantages to choosing secured loans for funding. Secured loans are acquired through collateral, meaning the borrower will offer an asset to the lender in exchange for funding. When applying for a secured loan, the lender will place a lien on the asset (collateral) until the loan has been paid in full. If you are late or default on your payments, one of the consequences could be forfeiture of your vehicle, which means the lender will repossess it.

Payoff

The payoff amount for your loan is how much you will pay in total to satisfy the entire debt and the terms of your loan. While you may have a specific total principal that you borrowed, it is often not the entirety of the loan. Your payoff amount is different than what your current balance on the loan is, or what the principal of the loan is.

Processing Fee

When a borrower accepts a loan contract from a lender, there are often fees that are attached to your loan. These fees can include loan origination fees, loan fees, or processing fees.

Poor Credit

Having poor or bad credit can significantly impact your life. Your credit history and score will determine what car you drive, what home you live in, and even your financial situation! A poor credit history can have much deeper consequences than you may think. Poor credit will cost a borrower in the long run, as any loan they apply for will have high interest rates. High interest rates will mean more money they will pay for borrowing money, and poor credit will also affect a borrower’s loan options.

Many lenders will simply deny a borrower with a poor credit score, and it can make it hard to find adequate housing or acquire a vehicle without a cosigner with good credit.

Pre Approval

If you have ever applied for a loan before, you may have seen the term pre-approval. Pre-approval for a loan simply means that you have been approved by a lender for a specific loan amount they agree to. If you are preapproved, you will see a statement or a letter that has the loan amount you have been approved for by the lender. The most common way that borrowers will see pre-approval is from credit card issuers and a new credit card! In the mail, many credit card issues send pre-approval for a credit card. This is generally to those with good standing credit, that pose little risk to the lender.

Principal

When applying for a loan, you will apply for, or get approved for a specific funding amount. The principal is the funding amount that you originally agree to pay the lender back when you sign your loan agreement. But, the principal is not what you will be paying back altogether. Instead, you will pay the principal balance, plus any fees that accrue or are set by the lender. As a borrower, you will also pay additional interest on the loan, as interest is the cost of borrowing the principal amount.

Proof of Residency

In order to apply for a loan, many lenders will require proof of residency first. This is done because a lender must have a verified proof of address, or proof that you live in a location in order to be able to send you statements and information about your loan. Without a valid proof of address, a lender has no way to verify that valued or important information about your loan is being received by you. While not every lender will require proof of residency, most lenders will to validate your identity.

Refinancing

Many borrowers will choose to refinance their loans, but for different reasons. Some will choose to refinance on their loans because they may default on their payments, and they do not want to have that on their credit report. Others will refinance to get a better interest rate, or a more affordable monthly payment.

Retail Value

Like anything that exists on the market to be sold, your vehicle has retail value. Retail value in a vehicle simply means that it has a price that a dealer will charge for a used car that has been reconditioned. A retail value is the price of a vehicle that a customer would expect to pay for the used car if they bought it through a dealership.

Salvage Title

Salvage Title refers to the record of the title, and it is an indication that the vehicle has been damaged. Not only was the vehicle damaged, but it is now considered a total loss by the insurance company, and paid out by a damaged vehicle claim from the owner.

Term Length

When a borrower signs a loan agreement, there is a set upon date that the lender is expecting the loan to be repaid. While this date could change if the loan is refinanced, there is often a rigid set term length for the loan. A term length for a loan is simply the amount of time you have agreed to repay the loan.

Third Party Payoff

Your payoff amount is what you will need to pay to satisfy the rest of your debt, and the terms of your loan contract. With a payoff amount, it means that your loan will be completely paid off. But, your payoff amount may be more than your current balance. This is due to fees, and any additional prepayment charges that you may face by paying it off early. Additionally, your payoff amount may include any interest charges that accrued with your loan through the day you intend to pay it off.

If you are considering consolidating your debt, what some borrowers will do is choose a third party payoff letter. This means that you’ve decided to work with another lender to handle your debt obligations. With a third party payoff, you will no longer be obligated to continue your loan contract with your current lender if they receive the letter and funds.

Title Loan

A title loan is a type of secured loan that allows a borrower to access funds by using the title of their vehicle. In order for a borrower to obtain a title loan, their vehicle must have a certain amount of equity. A title loan lender will require a borrower to have a vehicle with value, so it can be considered an asset for collateral.

Collateral allows a title loan to be secured, which makes the approval process much more flexible.

Trade in Value

If you own a vehicle, you may already be familiar with the trade-in-value of the vehicle. Trade in value simply means what the car dealership will value your vehicle and offer you when you are looking to trade your vehicle in for another. The amount will be offered to you during the transaction, and will be deducted from your vehicle’s price.