Glossary
36 financial and leasing terms explained.
A
The gradual repayment of a debt over time through regular scheduled payments that cover both principal and interest. Eac...
A type of funding used to acquire physical assets such as vehicles, machinery, or equipment. The asset itself typically ...
B
A large lump-sum payment due at the end of a loan or lease term. It represents the remaining balance not covered by regu...
C
The total cost of an asset as stated in a lease agreement. This is the negotiated price of the asset before any down pay...
An asset pledged as security for a loan or lease. If the borrower defaults, the lender can seize the collateral to recov...
A numerical rating that represents your creditworthiness based on your financial history. In Kenya, the Credit Reference...
D
The decrease in value of an asset over time due to wear and tear, age, or obsolescence. In leasing, depreciation determi...
An initial upfront payment made when entering a lease or purchase agreement. A larger down payment reduces your monthly ...
E
The difference between what an asset is worth and what you owe on it. Positive equity means the asset is worth more than...
F
A lease agreement where the lessee assumes substantially all risks and rewards of ownership. At the end, the lessee typi...
An interest rate that remains constant throughout the entire term of a loan or lease. This provides predictable monthly ...
An interest calculation method where interest is charged on the original principal amount for the entire loan term, rega...
G
A set period after a payment due date during which a late payment will not result in penalties or default. Typically ran...
A person who agrees to be responsible for repaying a debt if the primary borrower defaults. Common in African lending wh...
H
A financing arrangement where a buyer pays for an asset in installments over time. Ownership transfers to the buyer only...
I
The percentage charged by a lender for the use of borrowed money, usually expressed as an annual percentage. It represen...
J
A business arrangement where two or more parties agree to pool resources for a specific project while maintaining separa...
K
A regulatory process where financial institutions verify the identity and suitability of their clients. In leasing, KYC ...
L
An arrangement where the owner of an asset sells it to another party and immediately leases it back. This provides immed...
The person or business that leases an asset. The lessee makes regular payments for the right to use the asset during the...
The owner of an asset who leases it to another party. The lessor retains legal ownership while the lessee uses the asset...
A secured loan where the borrower uses their vehicle logbook (registration document) as collateral. Popular in Kenya and...
M
A decimal number used to calculate the interest portion of monthly lease payments. Multiply by 2,400 to approximate the ...
N
A financial metric that calculates the present value of all future cash flows associated with an investment or lease, di...
O
A short-term lease where the lessor retains ownership and the asset is returned at the end of the term. The lease term i...
P
The original amount of money borrowed or the remaining balance of a loan, excluding interest charges. Example: A Kenyan ...
Q
A form of financing that has characteristics of both debt and equity, such as mezzanine finance or convertible loans. Us...
R
An interest calculation method where interest is charged only on the outstanding principal balance. As payments are made...
The estimated value of an asset at the end of a lease term. A higher residual value means lower monthly lease payments. ...
S
Savings and Credit Cooperative Organization. A member-owned financial cooperative that provides savings and loan service...
A loan backed by collateral — an asset that the lender can seize if the borrower defaults. Vehicle loans and mortgages a...
T
The length of time until a loan or financial instrument matures. Also called the term or duration of the agreement. Exam...
U
A legal right to use and enjoy the benefits of someone else's property without damaging it. In real estate leasing,...
V
An interest rate that can change over the course of a loan or lease, typically tied to a benchmark rate like the Central...
W
The money available for a business's day-to-day operations, calculated as current assets minus current liabilities....
Y
The income return on an investment, expressed as a percentage. For lenders, it represents the return earned from interes...