Finance Glossary

27-September-2007

Fleur and Ashley discussed their love, and money

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Not sure what the bank's ranting on about when it comes to loans? Here's where we translate all the confusing terms...

Asset:

something that can be valued and used to repay any debts (e.g. car, house).

Balloon payment:

the large, final repayment at the end of a finance agreement. You own the car after you pay this.

Comparison rate:

the raw cost of the loan (the loan amount + the interest rate, set-up fees and any ongoing fees). It doesn't include government charges, optional feature charges and any other fees that can't be finalised at the time for whatever reason.

Debt consolidation:

when you combine all your debts together into one to make the repayments more manageable and easier to keep track of.

Depreciation:

the amount of value an asset (e.g. car) will lose over time.

Equity:

the value of an asset (e.g. house, car) minus any loan amount outstanding.

Financier:

a professional person or company that handles large-scale investments and loans.

Fixed interest rate:

an interest rate that doesn't change, even if the market interest rates go up.

Fringe benefits tax (FBT):

a federal tax that employers have to pay on any non-salary benefits, services or rights they give their employees (e.g. a car, gym membership or computer, etc.).

Input tax credit:

the amount of GST 'credit' businesses receive to pay off any GST on business-related purchases.

Interest rate:

the amount you pay to the financier for having the loan. It's a percentage of money you borrow.

Lender:

the person or business that gives you the money to borrow.

Loan default:

when you miss a loan repayment.

Repayment redraw:

when you take back any non-compulsory repayments you've made on your loan. This only applies to certain loans.

Residual value:

the estimated value of the leased car at the end of the lease agreement.

Secured loan:

where the lender takes an agreed asset (e.g. car) if you can't pay off the loan. The lender can then sell the asset to get their money back from the loan. If that doesn't cover the whole amount you owe, you have to pay the lender the outstanding loan amount, including interest, fees and charges.

Variable interest rate:

an interest rate that may go up or down with market fluctuations.

More

Finance glossary
Car finance options
How to get a loan online
Loan application must-haves
Car loans
Loan repayment calculator
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