Terms & Definitions

Question 1

1099 Form

Answer 1

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.

Question 2

Approval Sheet

Answer 2

Lists the terms or details of the transaction (application) that the applicant is required to meet before a deal is funded.

Question 3

Advance

Answer 3

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.

Question 4

Adverse Action (AA)

Answer 4

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.

Question 5

Amount Financed

Answer 5

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.

Question 6

Annual Percentage Rate (APR)

Answer 6

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.

Question 7

Backend Products

Answer 7

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

Question 8

Capacity

Answer 8

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.

Question 9

Vehicle Identification Number (VIN)

Answer 9

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.

Question 10

Collateral

Answer 10

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.

Question 11

Odometer Statement

Answer 11

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.

Question 12

Contract Rate

Answer 12

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.

Question 13

Credit Application

Answer 13

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.

Question 14

Credit Approval Has Expired

Answer 14

When the most recent credit approval for the applicant is greater than 30 days old. The approval sheet will show the approvals expiration date.

Question 15

Credit

Answer 15

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.

Question 16

Credit Exception

Answer 16

Any application underwritten with terms that are outside Flagship’s credit policy. Credit exceptions must be fully documented and receive proper approval.

Question 17

Debt-to-Income

Answer 17

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.

Question 18

Direct Loans

Answer 18

Refinancing products offered by Flagship direct to consumers. Direct loans are currently provided at times other than the initial purchase of a vehicle.

Question 19

Guaranteed Auto Protection (GAP)

Answer 19

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.

Question 20

Income Less than Stated

Answer 20

When an applicant/co-applicant’s income is verified to be less than submitted.

Question 21

Job Time Less Than Stated

Answer 21

When an applicant/co-applicant’s job time is verified to be less than submitted

Question 22

Loan to Value Ratio (LTV)

Answer 22

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.

Question 23

Note and Security Agreement

Answer 23

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.

Question 24

Payment to Income (PTI)

Answer 24

A ratio calculated as the applicant’s monthly payment on the application divided by their total monthly income.

Question 25

Prescreening

Answer 25

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.

Question 26

Principle

Answer 26

The amount of money that the borrower agreed to pay back according to the Contract.

Question 27

Proof of Income (POI)

Answer 27

Paperwork (e.g., pay stubs, tax returns) that verify a person’s income.

Question 28

Proof of Residence (POR)

Answer 28

Paperwork that confirms where an applicant/co-applicant resides (e.g., utility bill, mortgage statement).

Question 29

Term

Answer 29

The length of the Contract expressed in months.

Question 30

Verification of Employment (VOE)

Answer 30

The validation that the applicant is employed, as stated on the credit application.