Auto Loan Terms - Part 2
Liabilities
Everything you owe money on is considered a liability.
Lien
If you finance a car, the finance company will hold the title (certificate of
ownership) on the car and won’t release it to you until you’ve paid off the
debt.
Loan Term
The length of a loan. Car loans are usually measured in months instead of years.
Monthly Payment
The principal and interest combined that is owed on a loan. This is paid off
with regular monthly payments over the length (the "term") of the loan.
Negative Equity
This is when you owe more on a vehicle then its worth. Its also referred to as
being “Upside Down”.
Net Worth
Add up all your assets and then deduct all your liabilities and you end up with
your “Net Worth”.
Principal
This is the amount you borrow on a car loan. You also need to add the interest
on to the principal.
Term Loan
This is a loan that’s paid back in a lump sum at the end of the length of the
loan.
Upside Down
Also referred to as “Negative Equity”. This is when you owe more on a vehicle
then its worth.
Vehicle Equity
Also known as “Equity”. This is the amount your vehicle is worth when you
subtract what you’ve paid on the vehicle. Usually your cars equity is valued at
the wholesale price level.
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