Loan language, made clearer

A little clarity goes a long way.

APR

Annual percentage rate expresses the annual cost of borrowing, including interest and certain finance charges.

Principal

The amount borrowed that remains to be repaid, apart from interest.

Loan term

The scheduled length of repayment. A longer term can lower the payment while increasing total interest.

Payoff amount

The amount needed to close the current loan on a particular date. It can differ from the statement balance.

Loan-to-value

The loan amount divided by the vehicle value, expressed as a percentage.

Negative equity

The portion of a loan balance that exceeds the vehicle's value.

Soft inquiry

A credit-report inquiry that generally does not affect credit scores. Ask the provider which inquiry it will use.

Hard inquiry

A credit-report inquiry associated with a credit application that may affect credit scores.

Co-borrower

Another person jointly responsible for a loan. Adding or removing a borrower requires provider approval.

Prepayment penalty

A charge a contract may impose for early repayment. Check your current contract and payoff quote.