Discount credit

A discount loan is concluded between a bank and its customers. The customer sells a bill of exchange that is not yet due to the bank and receives the bill of exchange amount in return.

How does a discount loan work?

If a person is in possession of a bill of exchange and urgently needs money, they can sell it to the bank. The bill of exchange will be transferred to the seller's account as sales proceeds. However, the bank retains the interest that accrues until the bill is due. This amount is called the discount. In such cases, the drawee is required to pay the bill of exchange amount to the bank when the bill of exchange is due.

Discount credit as a secure form of credit

The bill of exchange is usually a document stating between whom the bill of exchange was concluded. For banks, the business of taking out a discount loan is worthwhile. At first glance, it looks like a purchase transaction, but it is a credit transaction, as the amount to be paid is not due immediately, but only after a certain period has expired.

The bill of exchange amount can be sued immediately after the due date if the drawee does not pay his debt. For banks, discount loans are very easy to implement, and only a small amount of administrative effort is required. For this reason, banks are very happy to do this type of business.

Summary

  • Discount credit is concluded between a customer and their bank
  • Payment is the amount of the bill less interest = discount
  • the drawee must pay the bill of exchange to the bank after the due date
  • Payment is to be made after the due date
  • can be sued immediately if the drawee does not pay
  • secure form of credit for banks
  • easy to do, no big administrative burden
Was the explanation to "Discount credit"Helpful? Rate now:

Weitere Erklärungen zu Finanzierung