Glossary

Plain-English definitions for everyone outside the boardroom.

BNPL (Buy Now, Pay Later): Short-term installment financing — typically four payments over six weeks — offered at point of sale by providers like Affirm, Klarna, and Afterpay. Distinct from longer-term retail installment contracts.
Credit Tiers: The segmentation of borrowers — prime, near-prime, subprime, deep subprime — used by lenders to price and underwrite credit. Most consumer-financing waterfalls explicitly map lenders to tiers.
First Payment Default (FPD): When a borrower fails to make the first scheduled payment on a financing contract. A key portfolio-quality metric watched by lenders and a frequent trigger for program changes.
Lease-to-Own (LTO): A non-credit financing structure in which the customer leases merchandise with the option to purchase. Used to backstop applicants who do not qualify for prime or near-prime credit. Common in furniture, automotive, and electronics.
Lender-Agnostic Platform: A financing platform that is not owned by or exclusive to a single lender, instead routing applications across a configurable network. Increases approval rates and reduces merchant dependence on any one funder.
Merchant Discount Rate (MDR): The fee a retailer pays to a financing partner per funded transaction, typically expressed as a percentage of the financed amount. Varies by lender tier, term, and promotional structure.
Prequalification: A soft-pull credit check that returns an estimated offer without affecting the consumer's credit score. Used at checkout and in marketing to surface financing options before a binding application.
Soft Pull vs Hard Pull: A soft credit pull is a non-affecting inquiry used for prequalification and pre-approval. A hard pull is a formal credit inquiry tied to a credit decision that may temporarily lower the consumer's score.
Stacking Contracts: The (typically prohibited) practice of opening multiple financing contracts on the same purchase to inflate funding. Modern platforms detect and prevent stacking across the lender waterfall.
Waterfall Financing: A consumer-financing workflow in which a single customer application is presented to lenders in tiered sequence — prime first, then near-prime, then lease-to-own — until an offer is accepted. Used to maximize approval rates without re-pulling credit.