May 4, 2022
What does pre-approval mean? How about all the other car loan words; submitted (and to who?), settlement, conditional approval… there are many.
OnlineLoans lists car loan words that can really help knowing if you’re looking to buy a car.
Here’s what they all mean – and, they are listed in order of when they occur in the car loan journey.
Car loan words in order of occurrence
Lender – one of the most common car loan words is lender. It means any institution that lends money to people, eg. banks. Lenders can be organisations other than banks, for example, a building society or credit union. There are many lenders in Australia that focus on different financial products.
Credit file (report) / credit history – typically a PDF, this document details someone’s past performance in repaying credit (eg. a phone plan or other loan). If you’re over 18 and have ever even applied for credit, you should have a credit file. These are provided by reporting agencies.
Non-borrowing spouse – this means the partner (eg. girlfriend, boyfriend, husband or wife) of the applicant. Looking at a couple’s finances, the non-borrowing spouse might have an income of their own and help with living expenses, therefore the applicant could have more surplus income for a car loan.
On the other hand, a non-borrowing spouse might require additional financial assistance which could reduce someone’s ability to repay a loan.
Deposit – this can be confusing. There can be a deposit for a car loan and another deposit for the car itself. Both can help, but are not mandatory, depending on lending conditions.
Deposit for car loan: this means a sum of money you pay upfront which reduces the amount you need to borrow. This can also improve your chances of approval too.
Deposit for a car: this is arranged between you and the seller of the vehicle and ensures the seller holds the car for you (and doesn’t sell it to anyone else). The amount is negotiated between a buyer and seller.
Interest rate – this is an important number and represents the excess or additional money you’ll pay in order to borrow the money for your car. Getting the lowest interest rate possible for your circumstances is the goal of many borrowers.
Tip: make sure to use a loan calculator in order to understand how much your repayments might be.
Comparison rate – this is the interest rate PLUS all fees and costs. Most loan products don’t ONLY add on an interest rate, they also come with fees such as an account keeping fee and/or establishment fee. Always make sure to read your loan details carefully and if you have any questions, ask them!
Submit documents – of course, you’ll need to provide documents like ID (eg. a driver’s licence), plus your payslips (usually the two most recent ones) among other things.
To submit your documents, you can simply upload them to the OnlineLoans portal. If you have concerns or difficulties, reach out to the team.
Pre-approval – these are super important for a car loan. It means you have a loan amount locked in, pending finding a vehicle. In other words, you’ve been matched to the right loan product and a lender has assessed your circumstances and agreed (in writing too) to lend you money upon finding a car.
For example, after submitting documents, someone might get a pre-approval for $30,000. Upon finding a car, they might agree on a price of $28,000, meaning the loan amount is reduced.
Conditional approval – this doesn’t happen every time someone takes out a car loan. It means you’re approved pending one or a few things, eg. a letter of employment or some other document.
Dealer – a business selling cars like a Toyota dealership. It can be easier when buying cars from dealers because as registered businesses, they can provide sales receipts and other documentation.
Private seller – a member of the public selling a car, eg. someone from GumTree. Private sellers are not registered businesses.
NOTE: you can use car loans for dealer and private sales cars (new and used)
PPSR – Personal Property Securities Register. A PPSR is an official document (typically PDF) that details if a vehicle has any finance owing or has ever been recorded as stolen or written off. A PPSR can be helpful in finding the history of used vehicles.
If a car you’re looking at has finance owing on it (eg. the previous owner bought it using a car loan and is selling it before paying off the loan in full), not to worry. It means some of the funds of your car loan will go to the seller and some to the lending institution that the seller used in order to pay off his or her car loan.
Insurance Certificate of Currency – a document (typically PDF) that details an insurance policy; the vehicle details, owner and interested parties which can include a finance company.
Approval – this means you’ve found a vehicle, agreed on a price and submitted the required documents. Usually a pre-approval turns into an approval after finding and agreeing on a car.
Loan contracts – these are the actual contract documents you’ll need to sign for the car loan to take place. These contracts details all and everything in regards to your car loan so make sure to read them carefully.
Some lenders allow you to digitally sign loan contracts and other lenders require you to print and wet sign (with a pen). Usually you can scan and email wet signed documents back.
Settlement – this means funds are sent (transferred) meaning the car is now yours. Of course, a lender won’t transfer funds unless all boxes are ticked, for example loan contracts have been signed.
Note that funds arriving in bank accounts are dependent on banking institutions.
Repayment – a scheduled bank transfer from you to your lender to repay the car loan.
Your first repayment is due depending on when you select your repayment frequency. For example, if you select fortnightly repayments, the first repayment will be due 14 days after settlement.
Refinance – this is optional and can take place typically after around a year of repayments. Refinancing means taking out another loan pay off your initial car loan – only if it’s beneficial to do so.
Some benefits of refinancing can include:
- Lower interest rate (if your credit score / position has improved since your initial car loan settled, you might qualify for lower rates)
- Different/extended loan term
- Possibly lower repayments
- Combining other loans you may have into one (consolidating other debts)
- New lender (which may come with better conditions)
Refinancing is not a one-size-fits-all solution so talking to a professional and going over numbers specific to your circumstances really helps.
Car loan words conclusion
It can seem like another language sometimes – but don’t be discouraged or leave questions unanswered.
Knowing all the car loan words can really help when discussing things and reading fine print.
If you’d like to play around with numbers like repayments, loan terms and interest rates, check out our car loan calculator.
If you’re ready to get your hands on a new car suited to your needs, try an OnlineLoans quick quote which allows you to.