Canada Loan Glossary -
Canadian Loan Terms - Terminology
APR
The "Annual Percentage Rate" is a yearly rate of
interest which includes fees and costs paid to acquire
the loan. Lenders are required by law to disclose the
APR, and the rate is used to compare various loans
available, making even simple interest and compound
interest loans comparable.
Amortization
Payment of an obligation in a series of installments or
transfers.
Applicant
A person applying for credit privileges, employment or
some other benefit
Appraisal
An opinion of the market value of an asset as of a
specific date.
Bank of Canada
Canada's central bank. The Bank of Canada
implements and oversees monetary policy for Canada.
Bank rate
The interest rate paid by major financial
institutions if they borrow from the Bank of Canada. The
Bank Rate influences the interest rates major financial
institutions charge and pay their customers.
Bankruptcy
The state of being bankrupt or the fact of
becoming bankrupt; "bankrupt" means a person who has
made an assignment or against whom a receiving order has
been made; a debtor "ceases to meet his/her liabilities
generally as they become due". As cited in the
Bankruptcy and Insolvency Act of Canada. When a debtor
who owes more than his or her assets relieves the debts
by transferring his or her assets to a trustee and is
relieved of the future obligation to repay unsecured
debts.
Borrowing
To obtain or receive (something) on loan with the
promise or understanding of returning it or its
equivalent.
Buyer
The person who signs the conditional sale
contract for vehicle purchase
Capitalized Cost
The total amount of value for the car upon which a lease
is based, similar to the selling price of an automobile
you purchase.
Capitalized Cost
Reduction
The amount paid in cash or trade-in at the inception of
a lease, similar to a down payment.
Collateral
An item of value that guarantees payment of
debt or may be collected in place of payment.
Collection Agency
A third party agency creditors use to collect
debt. Sometimes a collection agency is a company set up
by the creditor to collect debt. Also called a Credit
Agency.
Consumer Report
Also called a "credit report," a factual record
of an individual's credit payment history. Its main
purpose is to help a lender quickly and objectively
decide whether to give the consumer credit. A credit
report is used to develop a credit score, but does not
contain a score.
Consumer Reporting
Agencies (CRA)
Companies that gather and sell information
about where a consumer works and lives, how they pay
their bills, and whether they've been sued, arrested, or
filed for bankruptcy. The most common type of CRA is a
credit bureau. The information CRAs sell about the
consumer to creditors, employers, insurers, and other
businesses is called a Consumer Report or a Credit
Report. In Canada there are two reporting agencies:
TRANSUNION and EQUIFAX
Cosigner
A person who officially undertakes responsibility for a
loan in the event of the borrower's default.
Credit
Reputation for solvency and integrity entitling a person
to be trusted in buying or borrowing.
Credit Agency
A third party agency creditors use to collect
debt. Sometimes a credit agency is a company set up by
the creditor to collect debt. Also called a Collection
Agency.
Credit Application
The formal request for credit. A form where you
will have to provide your name, address, Social
Insurance Number, date of birth, and place of
employment. By signing the application. You are giving
the financial institution permission to check your
credit history and to collect, use and disclose your
personal information for the purposes set out in the
credit application.
Credit Bureaus
Private, for-profit companies that gather
information about a consumer's credit history and sell
it to banks, credit card companies, landlords,
employers, and other interested parties.
Credit Counseling
Service
Companies that provide debt management plans
and budget counseling, usually in return for fees.
Credit History
A record based on information supplied over
time by creditors with whom consumers have done
business. This information is reflected in a credit
report.
Creditor
A person or business who extends credit and to
whom money is owed.
Credit Application
The formal request for credit. A form where you
will have to provide your name, address, Social
Insurance Number, date of birth, and place of
employment. By signing the application. You are giving
the financial institution permission to check your
credit history and to collect, use and disclose your
personal information for the purposes set out in the
credit application.
Credit Report
Also called a Consumer Report, a factual record
of an individual's credit payment history. Its main
purpose is to help a lender quickly and objectively
decide whether to grant a consumer credit. A credit
report is used to develop a consumer's credit score, but
does not contain a score.
Credit Score
Credit scores provide a numerical
representation of a consumer's credit at a given point
in time. Credit scores are calculated using data
contained in a consumer's credit report. The score
assesses the likelihood that a borrower will repay a
loan or credit card.
Debt Load
The total amount of money the consumer owes.
Debtor
Someone who uses credit cards, owes money on a personal
loan, or is paying on a home mortgage.
Debt Collector
Someone who regularly collects debts owed to
others. This includes attorneys who collect debts on a
regular basis.
Default
Occurs when a borrower fails to repay a debt
obligation in accordance with its terms.
Delinquency
The inability of an individual to make a credit
or loan repayment within a specified (grace) period. At
that point an account would become delinquent. Equifax
delinquency ratings fall between 0 (Too New to Rate) and
9 (Bad debt; placed for collection). See Payment
Timeliness Rating.
Down Payment
The difference between the loan amount and the purchase
price, usually paid immediately upon purchase in the
form of cash or trade-in value.
Equifax-One
of two major credit-reporting agencies in Canada
headquartered in Atlanta, Georgia.
Equity
The residual value of a business or property beyond any
mortgage thereon and liability therein.
Escrow
The residual value of a business or property beyond any
mortgage thereon and liability therein.
Financing
The management of money, banking, investments, and
credit.
Foreclosure
The act of foreclosing, especially a legal proceeding by
which a mortgage is foreclosed.
Gap Protection
A type of insurance covering the amount owed due to
early termination of a lease agreement which is not
covered by auto insurance. Involuntary early termination
of a lease may occur when a car is stolen or
significantly damaged in an accident. The actual cash
value of the car paid by auto insurance may not be
adequate to pay the lease payoff balance and
early-termination penalties.
Gross Income
For qualifying purposes, the income of the borrower
before taxes or expenses are deducted.
Interest
The percentage a creditor charges on money
borrowed.
Insolvent
A person who is not bankrupt and who resides,
carries on business or has property in Canada, whose
liabilities to creditors provable as claims under the
Bankruptcy and Insolvency Act amount to one thousand
dollars, and
a) Who is for any reason unable at meet his obligations
as they generally become due;
b) Who has ceased paying his current obligations in the
ordinary course of business as they generally become
due; or
c) The aggregate of whose property is not, at a fair
valuation, sufficient, or, if disposed of at a fairly
conducted sale under legal process, would not be
sufficient to enable payment of all his obligations, due
and accruing due.
Installment
An account in which the outstanding balance is
reduced by a fixed or predetermined payment over the
term of the account. Includes loans with Banks, Credit
Unions or Trust companies.
Insurance
Coverage by a contract binding a party to indemnify
another against specified loss in return for premiums
paid. Interest: A charge for a loan, usually a
percentage of the amount loaned.
Lending
To provide (money) temporarily on condition that the
amount borrowed be returned, usually with an interest
fee.
Loan
That which one lends or borrows, esp. a sum of money
lent at interest; as, he repaid the loan.
Lock or Lock In
A commitment you obtain from a lender assuring you a
particular interest rate or feature for a definite time
period. Provides protection should interest rates rise
between the time you apply for a loan, acquire loan
approval, and, subsequently, close the loan and receive
the funds you have borrowed.
Lease
A written document containing the conditions
under which the possession and use of real and/or
personal property are given by the owner to another for
a stated period and for a stated consideration.
Lien
A legal hold or claim of one person on the
property of another as security for a debt or charge.
The right given by law to satisfy debt. (A lien must be
paid and released).
Loan- An
arrangement whereby a creditor gives a company or an
individual money and arranges for them to pay it back on
a timeline, usually with interest.
Manufacturer's Rebate
A program offered directly to the buyer by manufacturers
to increase the sales of slow-selling models or to
reduce excess inventories.
Money Factor
A percentage representing the cost of the money required
to lease a vehicle, similar to the interest rate paid on
a loan.
Mortgage
A temporary, conditional pledge of property to a
creditor as security for performance of an obligation or
repayment of a debt.
Mortgagee
One that holds a mortgage.
Mortgagor
One that mortgages property.
Refinance
To provide new financing or new financing for, as by
discharging a mortgage with the proceeds from a new
mortgage obtained at a lower interest rate.
Repossession
To reclaim possession of for failure to pay installments
due.
Residual Value
The amount agreed upon to represent the value of the car
at the termination of a lease, usually determined by the
amount of depreciation in the car's value predicted
during the term of the lease.
Revolving
An account in which the outstanding credit
balance is being reduced by at least a specified minimum
payment each month. Includes revolving accounts with
Banks, Credit Unions, Trust companies, personal lines of
credit or credit cards.
Savings Rate
Your savings rate is used to decide between two options
that cost you money at different times. (See Cost
Analysis) Please input a pre-tax average that you think
you can earn.
Secured Credit
Cards
Cards provided after a consumer deposits funds
into an account. Charges may only be made up to the
amount deposited.
Secured Debt
Debts linked to collateral. The collateral
guarantees payment of the debit, or the creditor has a
right to take the collateral. Secured debt is most
commonly used when purchasing homes or cars.
Term
The length of time that you will make payments on your
loan. Typical car loans have terms of 24, 36, 48 or 60
months going as high as 84 months.
Title
The aggregate evidence that gives rise to a legal right
of possession or control.
Trade-in Value
The amount that the dealership will credit you for the
vehicle you provide as partial or full payment for
another vehicle. Amount credited is frequently about 5%
below the wholesale value of the vehicle.
Transunion
One of two major Credit Reporting Agencies in
Canada. One of three major Credit Reporting Agencies in
the United States
Trustee
A trustee is appointed in a bankruptcy cases to
review the debtor's schedules, manage payments, and
generally represent the interests of the creditors in
the bankruptcy case.
Underwriting
The process of verifying data and approving a loan.
Unsecured Debt
Debts with no collateral. Commonly used with
credit cards, doctors' bills, student loans, personal
loans from friends or relatives, or rent.
Upfront Costs
Upfront costs are any fees and charges collected at the
time of the loan, as opposed to over the life of the
loan. Upfront fees can reduce the interest rate paid
over the life of the loan.
Upside-down
A situation which occurs when the value of your vehicle
is lower than the outstanding balance of the loan
secured by the vehicle.
Vendor
One that sells or vends.
Waive
To give up (a claim or right) voluntarily; relinquish.
