Glossary of Personal Loan Terms
AFC (Additional Finance Charges): Penalty levied for paying installments late.
Amortization: The repayment of a loan or debt in regular installments. Each installment is split into a principal repayment and an interest payment.
Asset: An immovable or movable property which can be used as security, against which credit can be offered.
Compound Interest: Interest charged or paid on the principal and the accumulated interest, unlike simple interest, which is paid only on the principal.
Credit Profile: The profile of an individual or a company, which reflects the person’s or the company’s capacity to receive credit and honour the terms and conditions of commercial credit.
CPA (Credit Processing Authority): The credit sanctioning authority which approves lending to a customer. Most banks and financiers have in-house credit teams, while some outsource CPAs.
Depreciation: The decline in value of an asset over a period of time.
DAS (Deduction against Salary): An arrangement where a salaried employee asks his employer to deduct the loan installment from his salary and pay it to the financier. This is done with the mutual consent of the employer and the financier.
DSA (Direct Sales Associate): An agency of the financier, which takes care of customer sales and service. Most car financiers do not have their own field sales force as their sales and service are handled by the agency. They are authorized by the financiers.
DMA (Direct Marketing Associate): Another name for DSA.
DPC (Delayed Payment Charges): Same as AFC. (Additional Finance Charges)
EMI (Equated Monthly Installment): A fixed amount you have to pay every month against the loan you have taken during the duration of your loan.
FCI/FI: (Field Credit Investigation or Field Investigation): The investigation done by an outside agency on behalf of the financier to authenticate the identity of the client and confirm his place of residence and office address.
FIR (Field Investigation Report): The report filed by the Field Credit Investigator or a field investigator after visiting the client\’s residence and place of work.
Franchisee: Another name for DSA and DMA.
Insurance Cover Note: A note issued by the insurance company before the actual policy document is issued to the client. It confirms that the asset has been insured. This is done because the policy takes a few days to be made, since it has to be processed by the company.
IRR (Internal Rate of Return): The rate of return which the financier would earn on the loan transaction.
Lease: A contract by which the owner of an asset lets it out for use to another for a specified time on payment of a specified amount called rental.
Lending Rate: The interest charged by the financier on the amount financed.
Loan Tenure: The duration for which a loan has been provided.
LPC (Loan Processing Charges): Service charge collected by a financier. Nowadays, few financiers collect it.
NeAR (Net Effective Annualized Rate): The net rate paid by the client after taking into account all discounts, other charges paid, subventions and advance installments. It is the rate to be used for evaluation of two or more offers.
NOC: No Objection Certificate
PDC (Post-Dated Cheques): Cheques issued in favour of the financier for repayment of loan.
Margin Money: Financiers do not fund the entire value of the asset being purchased. They expect the customer to bring a certain percentage of the total amount required for the purchase as margin, called Margin Money.
Octroi: A tax or cess applicable on goods which have entered a particular city/town.
Principal: The capital sum in a finance transaction as opposed to interest.
Registered Owner: The person in whose name a vehicle is registered.
Returns: Yields or profits made in a financial transaction.
Risk: Chance or danger of a loss of capital and/or interest in financial transaction.
Stamp Duty: Duty levied by the state government on certain legal documents and financial contracts.
Standing Instructions: Instructions to a bank to debit a fixed amount from your account and pay your financier.
Statutory Charges: Charges like stamp duty, sales tax etc imposed by the government.