The finance industry is notorious for its complex jargon and abbreviations that can leave the average person feeling lost. Here's a breakdown of key terms you may encounter:
1. AML (Anti-money laundering): Rules and restrictions imposed on NZ businesses to prevent money laundering and ensure transactional parties are identified.
2. MBI (Mechanical breakdown insurance), PPI (Payment protection insurance), and GAP (Guaranteed asset protection): Additional insurances that can be included in a loan to cover vehicle repairs, loan repayments during certain scenarios, and the difference between insurance payout and loan balance respectively.
3. Interest: Often expressed as an annual rate, but charged daily on the loan balance, compounding over time.
4. Fees: Most loans typically incur an application or establishment fee. Some lenders also charge a PPSR Fee and monthly admin fees. All fees will be detailed on your loan agreement.
5. Servicing: Determining loan affordability by assessing income, expenses, and ensuring a surplus for comfortable repayment exists.
6. CCCFA (Credit Contracts and Consumer Finance Act): The governing legislation that impacts how lenders operate in NZ, including recent changes requiring proof of income and thorough affordability checks through bank statement retrieval.
Understanding these terms empowers you to navigate the world of finance more confidently. Stay informed, ask questions, and make sound financial decisions.