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Acceptance Fee: A one time charge paid at the start of an asset finance agreement, covering the lender’s administrative costs.
Amortisation: The process of gradually reducing the principal balance of a loan through regular payments over the agreed term.
Annual Percentage Rate (APR): The total cost of borrowing expressed as an annual percentage, including interest and fees.
Arrears: Payments that are overdue, often leading to penalties or additional interest charges.
Asset: A tangible or intangible item of value, such as equipment, machinery, or vehicles, financed through a loan or lease agreement.
Balloon Payment: A larger than usual final payment at the end of certain finance agreements to settle the remaining balance.
Base Rate: The interest rate set by the Bank of England, which influences the rates lenders charge for borrowing.
Bill of Sale: A legal document transferring ownership of an asset, commonly used in secured lending agreements like logbook loans.
Broker: A professional intermediary who arranges asset finance agreements between lenders and borrowers.
Capital: The original sum borrowed or invested, excluding interest or earnings.
Capital Allowances: Tax relief on qualifying business assets, allowing businesses to deduct the cost of certain assets from taxable profits.
Credit Score: A numerical representation of an individual or business’s creditworthiness, used by lenders to assess risk.
Conditional Sale: A finance agreement where the customer takes possession of the asset but doesn’t own it until all payments are made.
Default: Failure to meet payment obligations as outlined in a finance agreement, potentially leading to repossession or legal action.
Depreciation: The reduction in the value of an asset over time due to wear, tear, or obsolescence.
Drawdown: The process of accessing funds from an approved credit facility.
Early Settlement: The option to repay a finance agreement before the end of its term, often subject to fees or penalties.
Equity: The difference between the value of an asset and the amount owed on it.
Facility: A pre-approved line of credit or loan agreement provided by a lender.
Fair Market Value (FMV): The estimated value of an asset in an open market.
Fixed Rate: An interest rate that remains constant throughout the term of a finance agreement.
Fleet Finance: A type of asset finance specifically for businesses that need multiple vehicles.
Full Payout Lease: A leasing agreement where the lessor recovers the full cost of the asset, plus a profit margin, through lease payments.
Guarantee: A legal commitment by a third party to cover a borrower’s obligations if they fail to repay.
Hire Purchase (HP): A finance arrangement where the customer pays in instalments and owns the asset after the final payment.
HPI Check: A check on a vehicle’s history to confirm it’s free of finance, stolen status, or other encumbrances.
Invoice Finance: A type of finance where businesses sell their invoices to a lender to improve cash flow.
Interest Rate: The percentage charged by a lender on the amount borrowed.
Lease: A contractual agreement where the lessee pays to use an asset owned by the lessor for a specified period.
Lease Purchase: Similar to hire purchase, but typically involves a balloon payment at the end of the term.
LIBOR: Formerly the benchmark interest rate, now largely replaced by SONIA (Sterling Overnight Index Average).
Maintenance Agreement: An optional service added to a finance agreement to cover asset servicing and repairs.
Margin: The profit percentage added by a lender to the base interest rate.
Master Lease Agreement: An overarching agreement covering multiple leases with a single client.
Operating Lease: A lease where the lessee only uses the asset for part of its useful life and returns it at the end of the agreement.
Option to Purchase: A clause in some agreements allowing the lessee to buy the asset at the end of the term.
Personal Guarantee: A promise by an individual to repay a business loan if the business defaults.
Portfolio: A collection of financed assets or investments managed by an individual or company.
Prepayment Penalty: A fee charged for early repayment of a finance agreement.
Refinancing: Replacing an existing finance agreement with a new one, often to secure better terms or release equity.
Residual Value: The estimated value of a leased asset at the end of the agreement.
Return on Investment (ROI): A measure of the profitability of an investment, calculated as a percentage of the initial cost.
Sale and Leaseback: A finance arrangement where a business sells an asset to a lender and leases it back for continued use.
Secured Loan: A loan backed by collateral, such as the asset being financed.
SONIA (Sterling Overnight Index Average): The benchmark rate for sterling transactions, replacing LIBOR.
Term: The length of time over which a finance agreement runs.
Title: Legal ownership of an asset.
Unsecured Loan: A loan not backed by collateral, relying solely on the borrower’s creditworthiness.
Variable Rate: An interest rate that can change during the term of a finance agreement, based on market conditions.
VAT Deferral: A financing option to spread the cost of VAT on asset purchases.
Warranty: A guarantee provided by the seller or manufacturer regarding the quality or condition of an asset.