payment cap
Limit on the amount by which a borrower's adjustable payments may increase, regardless of rise in interest rates; may result in negative amortization.

per diem interest
Interest calculated per day. (Depending on the day of the month on which closing takes place, you will have to pay interest from the date of closing to the end of the month. Your first loan payment will probably be due the first of the following month.)

permanent loan
A long-term loan of 10 years or more.

PITI
Abbreviation for Principal, Interest, Taxes and Insurance, the components of a monthly loan payment.

points
Interest prepaid to the lender at closing. Each point is equal to 1 percent of the loan amount. Paying more points at closing generally reduces the interest rate (and therefore monthly payments) on a loan.

power of attorney
Legal document authorizing one person to act on behalf of another.

prepaid expenses
Taxes and insurance paid in advance of their due dates, including at closing.

prepaid interest
Charged to a borrower at closing to cover interest on the loan between closing and the first payment.

prepayment
Full or partial payment of the principal before the due date. This might occur if the borrower makes extra payments, sells the vehicle, or refinances the existing loan.

prepayment penalty
Fee charged by a lender for early payment of debt.

prime rate
Lowest commercial interest rate charged by a bank on short-term loans to its most creditworthy customers.

principal
The amount of debt, not counting interest, left on a loan. Also called amount financed.

profit and loss statement
Financial statement showing sales, expenses and profits over a period of time.

purchase agreement
Contract signed by buyer and seller stating the terms and conditions under which a property will be sold.