Business, Legal & Accounting Glossary
A discount loan is a loan that does not require the payment of interest or any other charges; rather, a discount loan deducts the interest and/or other charges from the face amount of the loan when it is given out. That way, the person taking out the discount loan receives less. For example, a discount loan of $1,000 might yield only $930 for the borrower to use. The other $70 would be interest and/or other charges. When it comes time to repay the discount loan, the borrower must pay the full face amount; in our example, this is $1,000. Generally, only a short-term loan can be offered as a discount loan. It is usually paid back in one lump sum.
A discount loan is one in which the lender calculates the interest and other associated charges and subtracts them from the face amount before lending to the borrower. The borrower, on the other hand, must repay the entire amount – the principal, the associated costs, and the interest.
When a borrower takes out a loan, he or she must pay interest on top of the principal.
Discount loans are often given to persons in need of a short-term loan.
The lender divides the total by the number of months the arrangement will endure to arrive at the payment plan. However, in the vast majority of situations, the loan is repaid in full.
Assume you wanted to borrow $20,000 and repay it in twelve months. The interest and fees totalled $2,000. The lender would pay you $18,000 for your loan. However, you would still be required to repay the entire sum of $20,000.
Discount loans typically have higher interest rates than other types of borrowing.
A discount loan is one in which the lender calculates the interest and other associated charges and subtracts them from the face amount before lending to the borrower. The borrower, on the other hand, must repay the entire amount – the principal, the associated costs, and the interest.
When a borrower takes out a loan, he or she must pay interest on top of the principal.
Discount loans are often given to persons in need of a short-term loan.
The lender divides the total by the number of months the arrangement will endure to get the payment plan. However, in the vast majority of cases, the loan is repaid in full.
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This glossary post was last updated: 7th January, 2022 | 0 Views.