Terms & Definitions Flashcards
1099 Form
A type of IRS form that reports the various types of income a person may receive throughout the year other than salary or wages paid by their employer.
Approval Sheet
Lists the terms or details of the transaction (application) that the applicant is required to meet before a deal is funded.
Advance
Calculated as the sales price, minus rebates, cash down, and/or net trade divided by the vehicle value. Limited by the credit policy or by the terms of the approval.
Adverse Action (AA)
If an application is declined or counteroffered, Flagship will send an AA Notice to the applicant, which includes a statement of the adverse action taken, in accordance with Flagship policy.
Amount Financed
The total amount of money borrowed at the time the Contract is written. Flagship limits the minimum and maximum amount financed for any individual Contract.
Annual Percentage Rate (APR)
The cost of credit to a borrower, including certain fees, expressed as a yearly rate in a percentage. The APR is a broader measure of the borrower’s cost of a loan since it reflects not only the interest rate (see Contract Rate defined below), but also the fees that the borrower has to pay to get the loan, such as a loan origination fee.
Backend Products
Also referred to as Add-On, Ancillary or Voluntary Protection Products. These may include insurance, extended warranty or vehicle service contracts, for example, and they are optional products offered for sale to the applicant. The cost of such products is restricted by Flagship policy and state law requirements
Capacity
Applicant’s ability to satisfactorily repay the obligation. Capacity is based upon the applicant’s level and reliability of current income and known debt obligations.
Vehicle Identification Number (VIN)
An ID number given to each vehicle. It is listed on the Contract, Backend Product, Title Application, Odometer Statement, and the Agreement to Provide Insurance forms.
Collateral
A borrower’s pledge of specific property to a lender, to secure repayment of a loan. In automotive finance, the collateral is always the automobile being financed.
Odometer Statement
Form which shows the mileage of the vehicle at the time of the transaction. The VIN on this statement must be identical to all other documents.
Contract Rate
The interest rate that will accrue per year as written on the Contract. Interest rate refers to the annual cost of a loan to a borrower and is expressed as a percentage. The interest rate does not include fees charged for the loan.
Credit Application
Form required for each applicant. The form is filled out by each applicant and provides all necessary demographic information of the applicant. It is the initial reference point for the credit analyst.
Credit Approval Has Expired
When the most recent credit approval for the applicant is greater than 30 days old. The approval sheet will show the approvals expiration date.
Credit
Credit is the applicant’s history of repayment of other debts based upon the applicant’s
credit bureau report, application, and other information ascertained throughout the investigation process. This includes the types, amounts, and performance of paid and open debt obligations.
Credit Exception
Any application underwritten with terms that are outside Flagship’s credit policy. Credit exceptions must be fully documented and receive proper approval.
Debt-to-Income
A ratio calculated as the total monthly debt divided by the total monthly income. For applications with a co-applicant, total monthly debt is divided by total monthly income separately for each applicant. For joint applications total monthly debt is divided by total monthly income after amounts from both applicants have been combined.
Direct Loans
Refinancing products offered by Flagship direct to consumers. Direct loans are currently provided at times other than the initial purchase of a vehicle.
Guaranteed Auto Protection (GAP)
GAP Waivers or Debt Cancellation Agreements are optional products that protect the borrower in the event a total vehicle loss occurs, and the amount paid by the borrower’s insurer is less than the balance owed on the account. GAP premium maximums are restricted by Flagship policy and state law requirements.
Income Less than Stated
When an applicant/co-applicant’s income is verified to be less than submitted.
Job Time Less Than Stated
When an applicant/co-applicant’s job time is verified to be less than submitted
Loan to Value Ratio (LTV)
The total dollar value of the loan divided by the actual cash value of the vehicle. LTV is limited by credit policy or by the terms of the approval.
Note and Security Agreement
Also referred to as Contract. This is the legally binding contract between the applicant and the Company that states the actual terms and conditions of the loan.
Payment to Income (PTI)
A ratio calculated as the applicant’s monthly payment on the application divided by their total monthly income.
Prescreening
The process by which consumers are identified to receive firm offers of credit from the Company based on a predetermined set of criteria used to prescreen those consumers for inclusion on a consumer list from a consumer reporting agency.
Principle
The amount of money that the borrower agreed to pay back according to the Contract.
Proof of Income (POI)
Paperwork (e.g., pay stubs, tax returns) that verify a person’s income.
Proof of Residence (POR)
Paperwork that confirms where an applicant/co-applicant resides (e.g., utility bill, mortgage statement).
Term
The length of the Contract expressed in months.
Verification of Employment (VOE)
The validation that the applicant is employed, as stated on the credit application.
