Glossary of Terms

We know some auto loan terms can be confusing, so we've put together a useful glossary to better help you understand the industry language.

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Annual Percentage Rate

The Annual Percentage Rate, or APR, of an auto loan is the amount of interest charged yearly by a financial institution. Rates depend on the individual’s credit and key loan characteristics, including amount, term and vehicle age. A representative example of payment terms are as follows: A loan amount of $20,000 with an APR of 7.50% and a term of 70 months, would have a monthly payment of $353.63 with no down-payment required.

Auto Equity Loan

Often referred to as a title loan, this type of loan uses the equity you have in your vehicle in exchange for your title. You receive a cash loan and upon repayment the lender returns your car title.

Bad Credit

“Bad” or “Poor” credit generally is considered a FICO score around 600 and below by sources including the Consumer Federation of America and National Credit Reporting Association (reported by the Associated Press),,, Investopedia, and others. The Congressional Budget Office identifies a FICO score of 620 as the “cutoff” for prime loans. FICO scores are not the sole factor in lending decisions by Santander Consumer USA.

Balloon Payment

A balloon payment can make monthly payments lower on an auto loan, but require a large payment to be made at the end of the car loan.

Bill of Sale

A document prepared by the seller or dealership to record the details of a vehicle sale.

Black Book

Similar to Kelley Blue Book, Black Book is a collection of information about the value of a car, truck or SUV. Black Book bases the value of the car on data collected from wholesale car auctions.

Blue Book

Also referred to as Blue Book Value, this is the value of a vehicle as determined by Kelley Blue Book, Inc.


When purchasing a new or used vehicle, the buyer may be offered an option to buydown the interest rate on their car loan.

Cash Back Refi

A type of refinance loan that allows you to use the equity you have in your vehicle to get cash back while refinancing your car. Note: We are unable to refinance existing loans that are serviced by Santander Consumer USA, its companies or brands.

Certificate of Title

A document provided by the Department of Motor Vehicles that proves ownership of a vehicle.


An additional party who assumes equal responsibility for an auto loan.


A term used to refer to your credit history, which may indicate whether you have the ability to repay an auto loan or not.

Credit Bureau

A company or agency that keeps record of your credit history.

Credit History

A record of your financial relationships that allows lenders to determine your ability to repay loans.

Credit Scoring System

A system used to determine a customer’s creditworthiness based on statistical data and credit history


A lender that finances a loan.


An individual’s ability to repay debts.


A company that is authorized to sell certain vehicles by the vehicle manufacturer.

Debt-to-Income Ratio

Also known as DTI, this ratio expresses the percentage of a borrower’s debt compared to their total income.


Breaching a credit agreement, usually due to failure to repay based on the terms of the agreement.


Making car loan payments late or past the due date.


The gradual decline of a vehicle’s value due to age, wear and tear.

Destination Charge

A fee charged to a dealership by the manufacturer for shipping a vehicle to their location. This fee is part of the MSRP or base sticker price of a vehicle.


Any information about a vehicle’s history that is provided to a customer, which may include damages, repairs or title issues.

Down Payment

Money required to lower the amount financed on an auto loan.

Electronic Fund Transfer (EFT) Systems

An electronic method of transferring funds from one bank account to another.

Equal Credit Opportunity Act (ECOA)

A federal law that requires lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status or receipt of income from public assistance programs.


Based on funds you have paid on a loan, if your vehicle is valued at more than what you owe, you will have positive equity in your car.

F&I Office

Also known as finance and insurance, the F&I office is where auto loan customers fill out their contract and paperwork at a dealership before taking delivery on a new or used vehicle.

Finance Charge

The total amount of interest charges you will incur over the life of an auto loan.

Grace Period

A period of time from a payment due date in which you can be late without being charged a penalty fee.

Gross Monthly Income

The total monthly income of a borrower before any deductions have been removed such as insurance, child support and income tax.


Also known as finance charges, this is the amount a lender charges to provide a car loan to a borrower.

Interest Rate

Expressed as a percentage of 100, the annual rate of interest on an auto loan.

Invoice Price

The amount a dealerships pays for a vehicle when purchasing from the manufacturer.

Joint Account

An account with two parties who share equal responsibility to repay the loan.

Late Payment

A car loan payment received after the monthly contract due date.


An alternative way to finance an automobile in which an individual borrows the vehicle for a period of time while the leasing company remains the owner of the vehicle.


The individual who has temporary use of a vehicle in a lease agreement.


The company that provides temporary use of a vehicle during a lease agreement.


Ownership of a vehicle by a finance company until a debt has been repaid.

Loan-To-Value Ratio

Also known as LTV, this ratio expresses the percentage of difference between a loan amount and a vehicle value.


The difference between the invoice price and the sales price set by the dealer.

Monroney Sticker

The price sticker required by federal law for all new vehicles. The Monroney Sticker lists all the vehicle’s options along with the manufacturer’s suggested retail price (MSRP).


Manufacturer’s Suggested Retail Price. This price is the recommended selling price from the manufacturer and may change when options are added or removed from a vehicle.

Negative Equity

You may have heard the terms being “under water” or “upside down” or having “negative equity” when it comes to an auto loan. These three terms are often used interchangeably to mean the same thing – owing more on a vehicle than it is worth.

For example, say you are looking to trade in your current vehicle for a newer model. You still owe $15,000 to payoff the loan on that vehicle, but the vehicle is only worth $12,000. This means you’re $3,000 in negative equity.

Net Income

A borrower’s total income minus federal and state taxes.

Payment-To-Income Ratio

Also known as PTI, this ratio details the percentage of an individual’s income that an auto loan payment will require. Most lenders have a maximum PTI they will allow to avoid offering consumers loans they cannot repay.

Pink Slip

Also known as a vehicle title or certification.

Poor Credit

Sometimes called bad credit, this is below average credit, which may include late payments, repossessions, foreclosures and bankruptcy. Poor credit does not mean you cannot be approved for an auto loan.

Power Of Attorney

A legal document authorizing one person to act on behalf of another.


The total amount owed on a car loan, not including interest.

Proof Of Income

Also known as POI, this includes paystubs, employment verifications and/or bank statements to prove a borrower’s income.

Proof Of Residence

Also known as POR, this includes utility bills, driver’s license, lease agreement or any other documentation that displays proof of a borrower’s residence.


Financing an existing car loan with a new lender. This process is usually used when a borrower wants to lower their monthly payment, interest rate or change their auto loan term. Note: We are unable to refinance existing loans that are serviced by Santander Consumer USA, its companies or brands.


Repossession occurs when a customer defaults on an auto loan. Auto finance companies reclaim the vehicle when a customer fails to meet their financial obligation.

Service Charge

Charges that may include both costs incurred by the dealership to deliver the vehicle and the finance company to fund the loan.


The services and operations performed by a lender to the borrower during the life of a loan, such as collections, statements and payment receipts.


Short for stipulations, these are documents that are required by a lender to fund a loan. Stips may include proof of income, proof of residence, proof of insurance and any additional information the lender may feel is necessary to approve the auto loan.


The amount paid when purchasing a vehicle to satisfy state and other government tax requirements.


The amount of time during a loan from beginning to end, in which a borrower makes payments to repay the debt.


A document that proves legal ownership of a vehicle.

Title Loan

A type of loan that uses the equity you have in your vehicle to lend you cash. The lender holds your title until the auto equity loan is paid in full.

Trade-In Value

The value of a used vehicle that you trade in to a dealership as part of a purchase.


A federal law requiring disclosure of the Annual Percentage Rate to borrowers when purchasing a vehicle.

Upside Down

When a balance owed on a vehicle is more than the current value of that vehicle.


A law requiring that lenders do not exceed the state maximum interest rate when financing an auto loan. States can have multiple usury laws that apply differently to vehicles based on type or age.

Verification of Employment

A verbal or written verification of an individual’s employment.