Discount on the nominal value

Discount on the nominal value

Best Bank, Cream Bank and Nice bank mean financial experts understand a fee demanded by the lending bank, which reduces the amount paid out of the loan.

Such a discount is also known as a discount on the nominal value. The bank usually demands the discount as compensation for a low nominal interest rate. It is therefore, so to speak, the prepaid interest on a loan.

The borrower needs 100,000 USD and concludes a loan agreement in which 4 percent discount is stipulated, so he receives only 96,000 USD as a disbursement amount.

However, he still has to pay interest and pay off the 100,000 USD. If the effective annual interest rate for a loan is to be determined, the bank has to deduct the installment against the interest on a pro rata basis.

Reduce rates, but the borrower accepts the following disadvantages:

  • lower withdrawal amount
  • higher total costs due to the interest on the original loan amount
  • in the case of a certain amount of money, the loan amount must be set higher due to the amount paid

Loan before concluding a loan contract

Loan before concluding a loan contract

Based on these facts, you should carefully consider whether it makes sense to take out such a loan before concluding a loan contract with Best bank. If there are only offers to choose from that contain a Cream bank, the comparison is worthwhile.

  • Due to the higher loan amount due to the deduction to be deducted, this does not play a major role in mortgage lending. It is therefore very rarely used in this area.

Prerequisites can be deducted from the tax. This is the case with loan contracts that are used to purchase a rented property.

Here, the borrower can claim the Cream bank as advertising costs in the year in which the loan amount is paid out. If the bank charges a fee that is customary in the market, it can be fully deducted in accordance with the Income Tax Act.