Loan Mechanics

Loan Structure

Every Fleets facility is a fully amortising USD loan secured by a vehicle lien held by the licensed Nigerian SPV. The operator contributes between 20% and 40% of the vehicle value as equity; the protocol funds the remainder. This results in a loan-to-value ratio of 60–80%.

Vehicle Cost = Operator Equity (20–40%) + Fleets Loan (60–80%)

At default, the only recoverable asset is the vehicle itself. There is no additional collateral. Available loan terms: 12, 24, or 36 months
APR range: 15–25%, fixed at drawdown

The Amortisation Formula

Every loan uses the standard annuity (PMT) formula to compute a fixed monthly payment:

PMT = P × r / (1 − (1 + r)^(−n))

Variable	Description
PMT	Fixed monthly payment — constant for the entire loan term
P	Original principal (the Fleets loan amount)
r	Monthly interest rate = APR / 12
n	Total monthly payments (loan term in months)

This is the same formula used by every bank, mortgage lender, and auto finance company worldwide.

How Interest and Principal Work

Although the monthly payment is constant, the split between interest and principal shifts each month. Interest is calculated on the remaining balance, which decreases after every payment:

Interest_t   = Balance_(t-1) × r
Principal_t  = PMT − Interest_t
Balance_t    = Balance_(t-1) − Principal_t

For the protocol’s pool accounting, loan income is modelled as a fixed monthly interest contribution. This ensures predictable pool growth forecasting across the loan term.

Worked Example: `$80,000` Loan at 22% APR, 36 Months

PMT = ($80,000 × 0.22/12) / (1 − (1 + 0.22/12)^−36)
    = $1,466.67 / 0.48387
    = $3,031.34 / month

Month	Interest	Principal	Balance
1	`$1,466.67`	`$1,564.67`	`$78,435.33`
6	`$1,317.16`	`$1,714.18`	`$70,131.04`
12	`$1,145.64`	`$1,885.70`	`$60,603.74`
24	`$741.00`	`$2,290.34`	`$38,128.17`
36	`$54.62`	`$2,976.72`	`$0.00`

Total interest paid over 36 months: $29,128.24

How Repayments Are Routed

When a repayment arrives in the pool, the full payment is converted to yield-bearing tokens and enters the pool. The protocol accounts for the payment as follows:

Monthly Payment = Interest Portion + Principal Portion
     │                   │
     │                   └──► Reduces outstanding loan balance
     │                        (tops up Liquidity Reserve first if below 20%)
     └──► Flows through yield waterfall
          ├── 10% → Protocol Treasury (minted as FYC)
          ├──  5% → Insurance Fund (minted as FYC)
          └── 85% → FYC and FFC holders (via sliding cap)

Only the interest portion increases pool value. The principal portion reduces the outstanding loan balance, returning that capital to the pool’s yield-bearing token holdings.

Payment Schedule

All payment due dates derive from disbursement_ts — the timestamp of the actual USDC transfer to the operator via the SPV:

Payment_due[n] = disbursement_ts + n × 2,592,000 seconds  (n = 1, 2, 3...)

This is important: disbursement_ts is the clock anchor for all payment dates, not the loan origination date.

Grace Period and Default

If an operator misses a payment:

Day	State	Action
Day 1	Repayment due	SPV expects repayment. USDC credited to pool by end of day.
Day 2	Delinquent	Grace period begins. Penalty interest starts accruing. SPV contacts operator.
Days 2–30	Delinquent	Penalty applies at APR × 1.25 on the outstanding balance
Day 30, 23:59	Defaulted	Automatic state transition. SPV executes vehicle lien. No exceptions.
Day 31+	Recovery	Default waterfall. See Yield Model — Default Waterfall.

Penalty Interest

Penalty interest follows the same amortised structure as the regular loan, but with a 1.25x multiplier applied to the interest rate. This keeps penalties bounded — they cannot exceed the normal repayment amount scaled by 1.25. For a $50,000 loan at 25% APR:

Penalty rate = 25% × 1.25 = 31.25%
Monthly penalty interest = $50,000 × (31.25% / 12) ≈ $1,302

If an operator cures within the grace period, they owe their normal repayment plus the accrued penalty interest. If not cured, the vehicle lien is executed. Recovered penalty income — if any — is credited to the pool and benefits all LP token holders.

Multiple concurrent facilities can be active simultaneously. Total loan interest each period is the sum across all active loans. Each loan is tracked independently in its own on-chain account.

Ready to deposit? See Getting Started for a step-by-step depositor guide.

Fleets

Background

Protocol Overview

For Depositors

For Borrowers

Resources

Loan Structure

The Amortisation Formula

How Interest and Principal Work

Worked Example: `$80,000` Loan at 22% APR, 36 Months

How Repayments Are Routed

Payment Schedule

Grace Period and Default

Penalty Interest

​Loan Structure

​The Amortisation Formula

​How Interest and Principal Work

​Worked Example: $80,000 Loan at 22% APR, 36 Months

​How Repayments Are Routed

​Payment Schedule

​Grace Period and Default

​Penalty Interest

Loan Structure

The Amortisation Formula

How Interest and Principal Work

Worked Example: `$80,000` Loan at 22% APR, 36 Months

How Repayments Are Routed

Payment Schedule

Grace Period and Default

Penalty Interest