GLOSSARY

Welcome to our comprehensive glossary of car loan and financial terms, tailored specifically for the Australian market. Whether you're a first-time car buyer or an experienced owner exploring new options in Australia, understanding the terminology is crucial for making informed decisions. Our glossary is designed to demystify the complex world of auto financing in Australia and empowering you with knowledge.

Acceptance Fee

An acceptance fee is charged by some lenders to cover their administrative costs. While not all lenders impose this fee, those that do may either include it in the monthly payments or add it at the beginning of the finance agreement.

Annual Percentage Rate (APR)

APR represents the yearly cost of borrowing expressed as a percentage. It is typically higher than the flat interest rate as it factors in additional elements such as the acceptance fee, loan term, loan amount, and credit score. The APR determines the total amount you repay on top of the borrowed sum.

Australian Financial Complaints Authority (AFCA)

We are members of AFCA, who are an impartial and independent dispute resolution scheme for financial services. AFCA considers complaints that previously would have been handled by the Financial Ombudsman Service, the Credit and Investments Ombudsman and the Superannuation Complaints Tribunal.

Australian Prudential Regulation Authority (APRA)

The Australian Prudential Regulation Authority (APRA) is the regulatory body responsible for overseeing and ensuring the stability and safety of Australia’s financial system.

Australian Securities and Investments Commission (ASIC)

The Australian Securities and Investments Commission (ASIC) is the regulatory authority responsible for enforcing and regulating financial services and markets in Australia. ASIC overseas companies, financial service providers, and financial products to ensure compliance with laws and regulations.

Balloon Payment

A balloon payment is a single lump sum paid at the end of a finance agreement to purchase the car outright. The amount of the balloon payment is determined at the beginning of the agreement and is specific to PCP (Personal Contract Purchase) car finance.

Broker

Volt Loans, powered by Australian Asset Aggregation, is a credit broker. Which means we work with a broad panel of lenders and dealerships to help you find the best car and finance deal. Volt Loans won’t charge you for our service, but we receive a commission from the lender that varies based on the product, amount borrowed, or your credit score. This does not affect the amount you pay.

Capital

Capital refers to wealth in the form of assets, such as property or savings. In a car finance agreement, your capital is represented by the value of the vehicle once the finance agreement is fully paid off.

Car Finance

Car finance is a type of credit agreement that allows you to purchase a car by spreading the cost over time. A lender provides the loan, and the buyer repays it through monthly instalments. Ownership of the car is transferred to the buyer only after the final payment is made. Common types of car finance include Hire Purchase (HP), Personal Contract Purchase (PCP), Conditional Sale, and Lease Agreement.

Car Lease Agreement

A car lease agreement allows you to hire a car for an agreed period, after which you return the vehicle. The car is not yours to own.

Car Loan

A car loan is a financial agreement secured against the car you intend to buy. Rather than receiving the loan amount in cash, the funds are used to purchase the car, putting it directly in your possession. This is commonly referred to as financing a car.

Comparison Rate

The comparison rate includes all fees and charges associated with a loan, providing a more accurate representation of the overall cost. It allows you to compare different loans more effectively. Relying solely on the interest rate can be misleading, as it does not account for additional fees that may make a loan more expensive than it initially seems.

Credit Lender

A credit lender is an organisation that provides loans to borrowers, enabling them to access funds for various purposes, such as purchasing a vehicle.

Credit Report

A credit report is a comprehensive record of your credit history, detailing your borrowing and repayment activities. Lenders use this report to evaluate your creditworthiness and determine the risk of lending to you.

Credit Score

A credit score is an assessment of your ability to borrow and repay money. It is influenced by factors such as types of debt, amount of debt, number of credit accounts, frequency of credit searches, and geographical location. A higher credit score increases your chances of being approved for a loan or car finance. It reflects your credit history, including existing debt and your repayment track record.

Default

Default happens when a borrower fails to make the agreed-upon payments on their loan. This may lead to the lender taking legal action to recover the outstanding amount.

Deposit

A deposit is an initial payment made at the beginning of your financial agreement. The size of the deposit relative to the total amount you wish to finance affects the loan-to-value (LTV) ratio of the borrowing against the vehicle. With Volt Loans, you also have the option to choose a zero-deposit car finance arrangement.

Depreciation

Depreciation refers to the reduction in an asset's value over time. For cars, depreciation can occur due to factors such as ageing, decreased demand, vehicle damage, or increased mileage.

Early Termination Fee

An early termination fee is charged when you end your loan agreement before the scheduled end date. This fee can be significant, so it's important to be aware of it before deciding to pay off or close your loan early.

Equity

Equity is the difference between the amount you owe on a loan and the car's current resale value. You have positive equity if the car’s value exceeds the outstanding debt. Conversely, negative equity occurs when the amount owed surpasses the car’s resale value.