Glossary of Auto Loan Terms
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Late Payment
A late payment is a payment made after a specific date agreed upon
by the lender and borrower. Often, a payment made after that date
will include some type of monetary penalty. Late payments may
negatively impact the borrower’s credit score.
Lemon Law
A “lemon” is a term commonly used to describe a vehicle that fails
to meet the standards of the buyer. The Lemon Law allows the buyer a
set amount of time to return a vehicle to the previous owner -
including a dealer - if the car is a “lemon.”
Lender
The lender is that person or company that loans money, usually for a
specific purpose.
Lessee
The lessee is the person who takes out a lease on a car.
Lessor
The lessor is the person or company that provides a leased product
such as a car.
Liability Insurance
Liability insurance is a particular type of insurance designed to
protect a car owner from the cost of damages on a vehicle. The
person who takes out liability only insurance should remember that
in the case of an accident, his car will not be repaired or
replaced. Most lenders require that a person carry a comprehensive
collision policy until the terms of the loan are met, usually at
payoff.
Lien
The lien is the legal hold of a person or company that granted a
loan to a borrower against a particular item. Typically, the vehicle
itself is used as collateral, meaning the lender can take possession
of that vehicle if the borrower fails to meet the requirements of
the loan.
Lien Holder
The lien holder is that person or company that owns the lien.
Typically, the vehicle is used as collateral on a car loan and the
lien holder has the right to take possession of that vehicle if the
borrower fails to make the payments as agreed.
Lien Perfection
Lien perfection refers to a situation in which the lender has
established a right to a particular lien, typically by notifying all
third-party creditors of the lien.
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