Car Loan Jargon
General Terminology
Miscellaneous vocabulary terms often associated with auto loans and credit.
General Car Loan Terminology

Bankruptcy  Back to Top
A proceeding in a federal court in which an insolvent debtor's assets are liquidated and the debtor is relieved of further liability.
Chapter 7 - Liquidation - Is faster to complete, giving the debtor a financial "fresh start" without the years of sacrifice, however, most personal property with value is forfeited.
  • Most people will qualify for a car loan after bankruptcy.
  • Some lenders will approve loans prior to discharge. This enables a person to get a new vehicle prior to surrendering their current vehicle to the courts.
Chapter 13 - Reorganization - Allows an individual to begin debt repayment without forfeiting property. It requires that the debtor maintain a source of income and adhere to a payment schedule set forth by the court.
  • Few lenders will approve an auto loan while a person is in a Chapter 13 Bankruptcy.
  • The lenders that will require an "Authorization to Incur Debt" from the bankruptcy court.
  • This document may take up to 6 weeks to obtain.
Credit Counseling  Back to Top
A process where a third party negotiates with creditors and establishes a payment plan on behalf of the debtor. The fact that a person is in credit counseling is usually reported to the credit bureaus and is listed on the credit report.
Similar to a Chapter 13 Bankruptcy, few lenders will approve an auto loan while a person is in credit counseling.

Direct Lender  Back to Top
A that originates loans directly to consumers. For example, a bank or credit union.

Forced Placed Insurance  Back to Top
If a lender discovers that there is no insurance covering your automobile, it will take out a special policy to cover it's loan. This kind of insurance is expensive and it only covers the collateral. The lender will then add the premium costs of the new policy to your loan.

Indirect Lender  Back to Top
A company that purchases loan contracts from auto dealers but does not lend directly to consumers. For example, Ford Credit or GMAC.

Special Finance  Back to Top
Car loans for people with bad credit.




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