Glossary of Terms
The language of finance can be confusing. We've defined the most common terms you'll encounter when researching car title loans.
- APR (Annual Percentage Rate)
- The total cost of borrowing money for a year, including interest and fees, expressed as a percentage.
- Amortization
- The process of paying off a debt over time through regular payments of principal and interest.
- Collateral
- An asset (like a car title) that a borrower offers to a lender to secure a loan.
- LTV (Loan-to-Value Ratio)
- The ratio of the loan amount to the appraised value of the vehicle being used as collateral.
- Lien
- A legal claim on an asset that allows the holder to take possession if a debt is not repaid.
- Repossession
- The act of a lender taking back the collateral (the vehicle) after a borrower defaults on their loan payments.
- Principal
- The original amount of money borrowed, excluding interest and fees.
- Interest Rate
- The percentage of the principal amount charged by a lender for the use of its money.
- Title Pawn
- A term often used in states like Georgia to describe a car title loan where the lender holds the vehicle title as security.
- Grace Period
- A set length of time after the due date during which a payment can be made without incurring a late fee or penalty.
- Refinancing
- The process of replacing an existing loan with a new one, typically to obtain better terms or a lower interest rate.
- Rollover
- An extension of a loan's term, often involving additional fees and interest, when the borrower cannot pay the full amount by the due date.
- Clear Title
- A vehicle title that is free of any liens or legal encumbrances, proving that the owner has full ownership of the vehicle.
- Equity
- The difference between the current market value of a vehicle and the amount still owed on any existing loans against it.