Car finance terminology

Cars are rated by ANCAP (Australian New Car Assessment Program) and tested on how they perform in a crash. New vehicles are awarded a star rating from 1 – 5. The more stars out of 5, the safer the vehicle. At RAC we encourage WA motorists to consider their safety when purchasing a new or used car. Vehicles manufactured in 2012 and beyond must achieve a minimum 4-star ANCAP rating to be financed through RAC Finance.

A lump sum owed to the lender at the end of your loan term, after all regular repayments have been made. This can make your regular repayments lower as you’ll owe a lump sum at the end of your term. Not all car loans have a balloon payment so it’s best to check with your lender. RAC Finance doesn’t do balloon payments.

Your borrowing capacity is an estimation of your ability to make loan repayments and takes into account your income and expenses. All lending is subject to lending criteria and your borrowing capacity is calculated according to your personal situation.

A temporary document an insurance company can issue to provide temporary insurance until your formal car insurance policy is in place. RAC Finance doesn’t accept cover notes.

A document issued by your insurer which outlines the details of your insurance policy, including what’s covered and the terms and conditions.

A person who has the same loan contract as you and is responsible for the repayments of the loan alongside you.

To compare loans between different lenders, check out the comparison rate. The comparison rate will give you an idea of the true cost of the loan. It’s based on several factors including the loan amount, loan term, repayment frequency, interest rate and any fees.

A credit check is a check on your personal credit file. Your personal credit file contains information on your borrowing history and any enquiries you’ve made for finance. RAC Finance will conduct a credit check on your personal credit file when we assess your loan application.

Your credit score is calculated based on your personal credit file and borrowing history and tells a lender how likely you are to repay a loan.

An early termination fee may apply if you pay out your loan before the end of the loan term. If you pay your car loan or personal loan out within the first 2 years of your loan term with RAC Finance, an early termination fee may apply.

An encumbrance relating to a motor vehicle means there's still money owing on a loan for the vehicle and the lender has registered an interest in that vehicle.

These are initial fees you may be charged when you take out a loan.

A fixed rate loan means the interest rate won’t change throughout the term of the loan and your repayments will remain the same. RAC Finance only offer fixed rate car and personal loans.

A guarantor is a person who has agreed to take responsibility for the loan and make the repayments if you, the borrower, do not make the repayments. RAC Finance doesn’t offer guarantor loans.

A loan interest rate is a proportion of the loan amount that you’ll be charged. Your loan interest rate is shown as a percentage and will depend on your loan amount.

The length of time your loan will be in place. RAC Finance offers loan terms ranging from 3 – 7 years.

These are fees you may be charged throughout your loan term. RAC Finance doesn’t charge any monthly or ongoing fees.

After you submit your loan application, the paperwork is all the additional details and information that you’ll be required to provide to the lender for your loan application to be assessed.

A payout letter document includes the full amount owing on your loan on a particular day and provides instructions on how to pay off the loan in full.

PPSR stands for Personal Properties Securities Register. It’s an online register which tells you if the car you’re looking to buy has money owing on it to a lender. If the car still has a loan against it, the PPSR will show you that a lender has a security interest in that car.

A pre-approval means a lender has conditionally approved your loan, however before your loan is formally approved you may need to provide further paperwork requested by the lender. RAC Finance offers pre-approvals.

The amount of money you’ll be required to pay in order to pay off your loan. Repayments typically occur on a weekly, fortnightly or monthly basis.

A secured personal loan is a loan that has an asset offered by the borrower as security over the loan. An example of an asset could be a car, boat or caravan. The lender will then register their security interest over this asset on the PPS Register. For an RAC Finance secured car loan, your car must be registered in your name.

Security is an asset offered by you, the borrower, as security over the loan. If you’re looking at buying something like a car, you can consider a secured car loan where your car is your security.

This is where the lender has formally approved your loan, you’ve signed your loan contract and the funds are being provided. The funds may be provided to you in the form of a cheque, sent via BPAY or EFT, or they may be paid directly to a dealership.

An unsecured personal loan is a loan which has no asset held as security. You are required to be a home/land owner or buyer in WA to apply for an unsecured loan with RAC Finance. Lending criteria will apply.

A variable rate loan means the interest rate may change throughout the term of the loan. As the interest rate can change, your repayments may change during your loan term. RAC Finance only offer fixed rate car and personal loans.