Pierre Money Mart Blog

Proof of Address (POR)
Acceptable forms of POR include utility bills, credit card statements or anything received through the mail which contain the following:

* W2 Income
o This type of income is most important to a lender because it is attachable (it can be garnished).
+ Acceptable POI includes:
# Computerized pay stubs with year-to-date calculations.
# Four consecutive handwritten pay stubs and previous years’ W-2. Often, cancelled checks from the employer are required.
o Self Employment or 1099
+ This type of income must be verified with tax returns prepared by a professional tax service. Lenders require two years’ tax returns. It is rare for a lender to approve a person with bad credit that has been self employeed for less than two years.
+ Lenders use a customer’s adjusted gross income. That is income net of all expenses. This can be found on Schedule C of a tax return, or line 31 of the 1040.
o Child Support
+ A copy of the court order and a recent check or check stub will likely be required. Lenders may not count this type of income if it will not last for the length of the car loan.
o Social Security
+ Form SSA 1099 and a bank statement showing deposits will likely be required.
o Unreported Income
+ Income from cash jobs is not counted when calculating income.

Purchase price
Total purchase price. Price should be after any manufacturer’s rebate.

Additional monthly payment
Your proposed extra payment per month. This payment will be used to reduce your principal balance.

Amortization
The number of years used in calculating the monthly payment. Loans that are amortized over a longer period than their loan term have a balloon payment. See “Loan term” for more information.

Amount owed on trade
Total loan balance still outstanding on the trade-in.

Annual percentage rate (APR)
A standard calculation used by lenders. It is designed to help borrowers compare different loan options. For example: a loan with a lower stated interest rate may be a bad value if its fees are too high. Likewise, a loan with a higher stated rate and very low fees could be an exceptional value. APR calculations incorporate these fees into a single rate. You can then compare loans with different fees, rates or different terms.

Annual interest rate
Annual interest rate. Maximum interest rate is 20%.

Applied for Credit
Items on your credit report that you actually initiated the request for credit.

Assignment
The transfer of your loan from one lender to another. Or from the automobile dealership to the lender.

Auto loan interest rate (APR)
Annual percentage rate for the auto loan.

Non-taxable fees
Any additional fee that is not subject to sales tax. This usually includes document fees or any other fees that may be due at delivery and are not taxable.

No sales tax deduction for trade-in
In some states sales tax is calculated on your full purchase price. Others calculate tax based on the purchase price less trade in. Currently California, the District of Columbia, Hawaii, Maryland, Michigan allow no deductions for trade-ins when calculating sales tax. In addition, Alaska, Delaware, Montana, New Hampshire, and Oregon have no sales tax on new vehicles.

Negative Trade Equity
The difference between the lien payoff and the value of your trade in. This is a Negative Number

Cash down
Total amount of cash used in this purchase. The larger your cash down payment the smaller the loan you will need to finance this purchase.

Charge Off
Items that the original creditor has given up on trying to collect. Often these Charge Offs will show up twice on a credit report, once from the original creditor as Applied for Credit, and once from a collection agency as Unapplied for Credit.

Co-Buyer
Unlike a Co-Signer a Co-Buyer’s income is combined with the Buyer’s. This option is normally limited to a spouse or a person closely related residing at the same residence.

Co-Signer
Someone who assumes legal responsibility for repayment of a loan in the event the borrower does not pay. A Cosigner may be considered for a Buyer who does not comply with all the credit requirements. The income of the Buyer, however, must meet all the income and budget guidelines without reliance upon the income of the cosigner.

Credit Bureau
An agency that compiles, maintains and provides credit and other personal information to creditors. There are three major credit reporting agencies:
o Equifax®
+ P.O. Box 740241
Atlanta, GA 30374-0241
Phone: (800)685-1111
o TransUnion®
+ P.O. Box 19022
Chester, PA 19022
Phone: (800)916-8800
o Experian® (formerly TRW)
+ P.O. Box 2002
Allen, TX 75013
Phone: (888)397-3742

Credit Report
A historical document that may include payment habits, number of credit or loan accounts, balance of those accounts, place and length of employment, and records of financial transactions. The following items normally appear within the credit report.

Credit Score
A statistical formula that assigns a numerical value to your credit worthiness. There are many different score models. When you apply for an auto loan the lender is most likely viewing your “Car Enhanced Score”. This score may be higher or lower than your regular credit score. Scores can vary widely among all three credit bureaus.

Credit Scoring
A system used by banks and other lending institutions to determine whether or not you are creditworthy. Each lender uses their own score card to determine if they will approve an auto loan.

Commitment fee
An upfront fee included in the APR calculation.

Judgments
A court order to repay a debt. A creditor with a judgment in their favor may request a wage garnishment to repay the debt.

Employment Insurance
Not available in every state. This insurance pays your monthly car loan payment if you involuntarily loose you job.

Extended Service Contract
Covers the cost of unexpected auto repairs. Service contracts normally have a per visit deductible and most do not cover normal wear items such as break pads.

Home equity interest rate (APR)
Annual percentage rate for the home equity loan.

Home equity closing costs
Any additional costs to the home equity loan. This should include any appraiser fees, points paid or other misc. fees.

GAP Insurance
If your vehicle is totaled for any reason the amount your insurance company pays may be a whole lot less than the actual amount you still owe on your loan. GAP Insurance pays the difference. This product is highly recommended if you are adding negative equity to your new loan.