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					Amortization
The reduction and retirement of a debt through periodic payments of interest and principal.

Accrued Interest
Interest which accumulates on the unpaid balance of the car loan principal.

Assignment
The transfer of your auto loan from one lender to another; or from the automobile dealership to the
lender.

Buyers Order
This form is the legal contract between the buyer and the seller.

Buyer’s Guide
The Federal Trade Commission's (FTC) used car rule requires dealers to post a buyer’s guide in
every used car they offer for sale. The buyer’s guide must tell you:
     • Whether the vehicle is being sold "as is" or with a warranty.
     • What percentage of the repair costs a dealer will pay under the warranty.
     • That spoken promises are difficult to enforce.
     • To get all promises in writing.
     • To keep the buyer’s guide for reference after the sale.
     • The major mechanical and electrical systems on the car, including some of the major problems you
       should look out for.
     • To ask to have the car inspected by an independent mechanic before you buy.

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 that resides at the same residence.

Co-Signer
Someone who assumes legal responsibility for repayment of the automobile loan in the event the
borrower does not pay. A buyer may need a co-signer if they do 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 c-signer.

Credit Bureau
An agency that compiles, maintains and provides credit and other personal information to creditors.
There are three major credit reporting agencies:
     Equifax                                                          Trans Union                                                 Experian (formerly TRW)
     P.O. Box 740241                                                  P.O. Box 1000                                               P.O. Box 2002
     Atlanta, GA 30374-0241                                           Chester, PA 19022                                           Allen, TX 75013
     Phone: (800)-685-1111                                            Phone: (800) 916-8800                                       Phone: (888) 397-3742




                                               Corporate Office • 850 Woodlake Road • Kohler, WI 53044
              Kohler Credit Union membership is open to everyone who lives or works in Sheboygan, Calumet, Fond du Lac, Manitowoc, Ozaukee or Washington County.
                                                                              www.kohlercu.com
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.
   1. 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.

   2. Applied for Credit - Items on your credit report that you actually initiated the request for credit.
        • Installment Credit - Loans that have a fixed monthly payment for a fixed period of time. These
            items are the most important items on your credit report when you apply for an auto loan.
            Examples include auto loan and mortgages.

           •   Revolving Credit - Loans that do not have a fixed monthly payment nor a fixed period of time.
               Examples include credit cards and home equity lines of credit.

           •   Open Credit - Loans that must be paid in full each month.

   3. Unapplied for Credit - Items that you did not initiate a request for credit. These items only show up on
      your credit report if you don't pay them. Examples include utility and medical bills, bad checks, and
      collection agency accounts.

   4. Charge Off / Write 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.

   5. 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.

Credit Scoring
A system used by 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. The following items are
normally contained in a lender score card:
    •   Credit report score
    •   Time in credit file
    •   Time on job
    •   Monthly income
    •   Debt to income ratio
    •   Payment to income ratio
    •   Loan to value

Debt Ratio
How much you earn compared with how much you owe. The lower your debt ratio, the more
disposable income you have. To calculate, take the amount needed to repay debts each month,
including rent or mortgage, and divide this by your gross pay (your pay before deduction of tax).

Delinquency
Failure to make one or more installment payments by the due date(s).

                                                Corporate Office • 850 Woodlake Road • Kohler, WI 53044
               Kohler Credit Union membership is open to everyone who lives or works in Sheboygan, Calumet, Fond du Lac, Manitowoc, Ozaukee or Washington County.
                                                                               www.kohlercu.com
Deficiency Balance
A deficiency is any amount you still owe on your contract after your creditor or lessor sells the vehicle
and applies the amount received to your unpaid obligation. This also applies to lease turn-ins with
over mileage charges.

Disclosure Statement
A statement of the total amount and cost of the car loan, including the principal loan amount, interest
rate and any additional finance charges or loan fees. The disclosure statement is contained within a
bold box on the retail installment (finance) contract.

Finance Charges
A set percentage charged to the borrower by a lender. To calculate this, subtract the total of
payments from the amount borrowed.

Fixed Interest Rate
A fee charged for the use of borrowed money, based upon a set percentage rate.

Insurance Products
When you're borrowing money to buy a car it's likely that you'll be offered insurance products.
    • 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.
    • Credit Life - Credit life insurance pays off the balance of your loan upon your death.
    • Disability - This insurance pays your monthly payment if you are unable to work due to illness or injury.
      There is normally a waiting period:
    • 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 brake pads.


Loan to Value (LTV)
The amount financed relative to the published book value of the vehicle. Lower LTV's have a better
chance of approval. Lenders usually use trade of wholesale value book value when calculating LTV.
    • Book Value - The published valuation of a vehicle. There are three nationally recognized vehicle
      valuation services: NADA, Kelly Blue Book and Black Book.




                                               Corporate Office • 850 Woodlake Road • Kohler, WI 53044
              Kohler Credit Union membership is open to everyone who lives or works in Sheboygan, Calumet, Fond du Lac, Manitowoc, Ozaukee or Washington County.
                                                                              www.kohlercu.com
Minimum Money Down
Few lenders will approve an auto loan for someone with bad credit without money down. Lenders
vary on acceptable forms of down payment; a summary follows:
    • Cash - Cash is always acceptable.
    • Trade Equity - The difference between the value of your trade and the lien payoff. Trade equity is
      always acceptable as a down payment.
    • Negative Trade Equity (Upside-Down) - The difference between the lien payoff and the value of your
      trade. Since this is a negative number it cannot be used as a down payment.
    • Manufacture's Rebate - Some lenders do not allow rebates to meet their minimum required down
      payment. The rebate, however, is still used to reduce the finance amount.
    • Dealer Rebate - Lenders do not allow dealer rebates to meet their minimum required down payment.
      The rebate, however, is still used to reduce the finance amount.


Payment
Payments received are first applied to (collection) fees, then to accrued interest, and finally to the
outstanding principal balance.

Payment to Income
Your monthly car payment compared to your gross monthly income. Most lenders prefer this ratio to
be less than 15%.

Principal
The amount borrowed, or the amount on which you pay interest and must pay back, which may
increase as a result of capitalization of interest.

Principal Balance
The portion of the original loan, plus capitalized interest, which the borrower has not yet satisfied
through payment or cancellation.

Repossession
When a creditor or lessor take possession of your vehicle after you default on your loan or lease. For
credit rating purposes it does not matter if the repossession was voluntary or involuntary.

Simple Interest
A flat rate of interest that is not compounded, generally expressed as an annual rate.




                                               Corporate Office • 850 Woodlake Road • Kohler, WI 53044
              Kohler Credit Union membership is open to everyone who lives or works in Sheboygan, Calumet, Fond du Lac, Manitowoc, Ozaukee or Washington County.
                                                                              www.kohlercu.com
Stipulations
Documentation may be required to prove items on your initial bad credit car loan application.
    • Proof of Income (POI) - Income is the single biggest factor in determining how much or what type of
      vehicle you can purchase.
          o   W2 Income - This type of income is most important to a lender because it is attachable (it can
              be garnished). Acceptable POI includes:
                        - Computerized pay stub 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-employed for less than two years.
          o   Child Support - A copy of the court order and a recent check or check stub. Lenders may not
              count this type of income if will not last for the length of the car loan.
          o   Social Security - Form SSA 1099 and a bank statement showing deposits is usually required.
          o   Unreported Income - Income from cash jobs is not counted when calculating income.
    • Proof of Address (POR) - Acceptable forms of POR include utility bills, credit card statements or
      anything received through the mail which contain the following:
          o   Customer's name
          o   Customer's address
          o   Dated within last 30 days
    • Telephone Bill - Some lenders require proof of home phone service. Many lenders are now accepting
      cell phone service as well.
    • Mortgage Statement - The most recent mortgage statement is used to verify your monthly mortgage
      obligation. This document also serves as POR.
    • Lease/Rental Agreement - Used to verify your monthly obligation. Often the landlord’s phone number
      is required for verbal verification.




                                               Corporate Office • 850 Woodlake Road • Kohler, WI 53044
              Kohler Credit Union membership is open to everyone who lives or works in Sheboygan, Calumet, Fond du Lac, Manitowoc, Ozaukee or Washington County.
                                                                              www.kohlercu.com

				
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