Precompute

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Precompute

Method of charging interest in which the annual interest is either deducted from the face amount of the loan when the funds are distributed or is added to the total amount and divided into the regular payments.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Precompute

To calculate the annual interest owed on a loan by either deducting the annual interest from the face amount of the loan, or adding the compound interest together and dividing it out equally over 12 monthly periods. This means that the effective interest paid will be higher than the stated amount on the loan. Because of this, most jurisdictions require lending institutions using precomputation to express the interest rate in simple interest terms.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved
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