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Discount Rate Method

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The discount rate method is the procedure used to assess interest on a loan in which interest is deducted up front and the customer receives use of the full principal of the loan less the interest assessed.

For example, if a customer took out a $100 loan using the discount rate method, he or she may only receive $95 up front, but then be expected to repay the full $100 at the end of the term.

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