Guaranteed Asset Protection, usually referred to as GAP Insurance or GAP Protection, pays the difference between how much you owe and how much your vehicle is actually worth, in the event that you have a total loss. This amount is also referred to as Negative Equity. GAP normally pays your insurance deductible up to $1000 as well. This protection is always optional, prorated, and cancelable, at any time.
A Vehicle Service Contract is a protection plan that helps to pay for any mechanical or electrical repairs your vehicle may require in the future. They can be structured in a multitude of different ways, from covering only your Powertrain for a few years, to full exclusionary coverage that would protect nearly every part on your vehicle for the life of the loan. This protection is always optional, prorated, and cancelable, at any time.
Your debt-to-income ratio is the sum of your monthly minimum debt payments plus your housing expense, divided by your gross (pre-tax) monthly income. Lenders use this number to measure your capacity to repay your debt, based solely on your current financial position
Loan-To-Value is calculated by taking the current remaining balance of your loan, and dividing it by the actual cash value (ACV) of your vehicle - how much you owe / how much your car is still worth. If your LTV is over 100%, you owe more on your car loan than your vehicle is currently worth, and you have negative equity. If your LTV is under 100%, your vehicle is worth more than what you owe, and you have positive equity.
Loan-To-Value (LTV) is a direct reflection of your equity. If your LTV is under 100%, you owe less on your car loan than your vehicle is worth, meaning you have positive equity. Positive equity is more desirable to lenders.
Loan-To-Value (LTV) is a direct reflection of your equity. If your LTV is over 100%, you owe more on your car loan than your vehicle is currently worth, meaning you have negative equity. Negative equity is also referred to as being 'upside down' or 'underwater' on your loan. Negative equity can make it harder to qualify for refinancing, but other factors including DTI and credit score will be considered in the lender's risk assessment.
