What are the five most used car finance phrases?

Jargon, jargon, everywhere… At least, that’s how it often seems these days, doesn’t it, particularly in the world of car finance! If only people would speak plain, keep things simple, give it to us straight each time. Imagine how easy it would be to understand and absorb information, and to assess it before coming to a decision.

A clear view!


According to the good folks at Dictionary.com, a clear and succinct definition of Jargon goes something like this: “the language, especially the vocabulary, peculiar to a particular trade, profession, or group”. But hang on! It then goes on to provide a second definition: “unintelligible or meaningless talk or writing; gibberish.” Gibberish indeed! Gabble. Twaddle. Rubbish. Garbage. Nonsense. Claptrap.

To be fair, when it comes to understanding jargon used by those in the car finance industry, it’s not mindboggling stuff, not compared to the somewhat irritating lingo persistently spouted by people in many other industries. Around car finance, it would still be nice if jargon was minimised, though, wouldn’t it? These days we’re all so busy busy. We need to sort out things like car loans or car Hire Purchase agreements quickly, efficiently, and in a no-hassle way.

Let’s start addressing this problem RIGHT NOW. How? By translating the five most commonly used car finance phrases (in no particular order):

1: Poor credit history

Erm, what exactly does that mean? When it comes to ‘history’, how far back are we going here?

Well, the answer is: a few years. Not since the day you were born! If, for whatever reason, you’ve defaulted on a loan in the past, you’re credit rating is unlikely to be great, which means lenders will probably be nervous about approving your application for car financing: basically because of a “high level of risk” that you may miss some of the required repayments. But don’t despair…

Once your credit rating improves, you’ll be back in the game. And if you’ve still got bad credit, you many well still get a car loan, so it’s always worth trying. You never know, you may come across a specialist lender who doesn’t care if you’re credit history is worse than Henry VIII’s relationship history! A new set of wheels may still soon be yours.

2: Credit Rating

This one crops up time and time again, doesn’t it? Is your credit rating high or low/good or bad? And what on earth is a credit rating anyway? Well, think of as a figure arrived at within a numerical scoring system (a scale) used by credit referencing agencies.

When a broker submits your application for car finance, the lender will then contact a credit referencing agency. They’ll have their own way of doing things – there’s no one single scale that every agency uses. If your credit score is somewhere near the bottom of the scale, of course, you’ve got ‘bad credit’, which means you may be turned down for finance. But, don’t feel too downhearted about it. You may still be able to get on the road at last, or upgrade your current vehicle to a better one, regardless of whether your credit rating score is high or low. With your low credit rating considered, you can still land a car finance agreement, but possibly priced differently to someone with good credit, and with a slightly adjusted interest rate, depending on the level of risk involved.

3: Equity

Yeah, the “Equity” word. Sounds posh, doesn’t it? And it certainly crops up a lot when money and property is talked about by serious-looking silver-haired foxes in Armani suits. Don’t feel intimidated by this term. Equity simply means how much of the loan balance is left to pay on the car you’ve secured on a finance deal, and what the market deems your car to be worth – i.e. the difference between the two. When you venture into the realm of “negative equity”, that means your motor’s value is lower than what’s left to pay on the loan. Yikes!

4: Unsecured Loan

Sounds worrying this one, doesn’t it? As if the loan you’ve signed up to isn’t worth the paper it’s written on! Never fear. It’s not nearly as bad as it sounds; in fact, it’s the finance company who’ll be sweating when it comes to unsecured loans, not the borrower. The bottom line with a loan that’s not “secure” is that the car you’ve happily driven away from the dealer’s forecourt hasn’t been secured against any type of asset, such as a property or another vehicle perhaps, or even the car you’ve just taken ownership of under the finance terms.

5: VIN

No, before you get carried away with excitement, you won’t be getting a free bottle of Chardonnay or dinner-for-two with ex-footballer hard man, now Hollywood actor, Vinnie Jones if your application for car finance is approved! VIN is simply an abbreviation for Vehicle Identification Number. Every car’s got one. And it’s not the same as a car registration number. The difference being that a car number plate can be changed, whereas as VIN can’t. Why not? Because British Police need it for identity tracking and fraud prevention.

Hope that helps!