Discount Interest

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Discount Interest

Interest at a beginning of the loan. For example if you take out a one-year loan of $100 at a discount interest rate of 10%, you would receive $90 at the outset.

Discount Interest

1. A situation where all the interest on a loan is paid at once. That is, the interest is deducted from the amount the borrower receives at the beginning of the loan. For example, if a bank makes a loan of $20,000 at a simple interest rate (that is, a non-compounding rate) of 5%, the bank simply does not give the borrower $1,000 (or 5% of $20,000). The borrower effectively borrows $19,000 and repays it with no interest. Discount interest is very rare in retail banking.

2. See: Discount rate.