Glossary of Auto Loan Terms
(E)
Effective annual interest rate
The effective rate does not include one-time costs, such as closing
costs. The effective interest rate is calculated using the nominal
interest rate and the number of times interest is compounded.
Effective Gross Income
This is a term more often used in connection with rental property.
Essentially, the effective gross income is that amount earned
through the lease of a piece of property - in this case, a car. The
effective gross income is typically derived by taking the amount
that would be earned on a car for the duration of a lease, taking
into account any expenses including the amount of time the car is
not earning money.
Electronic Funds Transfer (EFT)
An electronic funds transfer is a way to make payments on almost
anything, including a car payment. Essentially, the lender takes
information about your bank account and will automatically withdraw
a specific amount as agreed upon by the borrower and lender. There
are some important facts to keep in mind, including that a person
with your bank account numbers could misuse that information. To be
certain that your payment is handled properly, don’t make payments
to a lender who calls you because you have no way to verify that the
call is legitimate. Instead, place the call yourself.
Endorser
The endorser is, in very general terms, a person who supports
another person. In the case of loans, the endorser will likely be
called on to co-sign for a loan.
Equal Credit Opportunity Act (ECOA)
The Equal Credit Opportunity Act is a federal law that governs any
company or individual that regularly extends credit. The statute
allows lenders to base decisions on credit eligibility only on those
facts that impact the borrower’s ability to repay the loan. Other
factors, such as race, gender or ethnicity, may not be considered.
Equity
The determine the equity of a vehicle, compare the current value of
the vehicle to the amount owed.
Extended Warranty
An extended warranty is a warranty for an additional amount of time
past the standard warranty offered on a particular vehicle. Extended
warranties may be part of a negotiated deal but typically add to the
total cost of the vehicle. |
