Deferred Interest
Deferred interest is accrued finance charge that is waived only if a promotional balance is paid in full by the stated deadline.
Distinguish interest accrued conditionally during a promotion from interest deducted from loan proceeds in advance.
Deferred and discounted interest both change the apparent timing of borrowing cost, but in opposite ways. Deferred interest is tracked during a promotion and may be waived later; discount interest is taken from proceeds at the beginning of a loan.
| Feature | Deferred interest | Discount interest |
|---|---|---|
| When charge is calculated | During a promotional period under the account method | At origination from face amount, rate, and term |
| Immediate cash effect | Purchase or balance is financed without the conditional interest being posted | Borrower receives less than the face obligation |
| How charge may be avoided | Satisfy the pay-in-full promotion terms | Not normally avoidable after origination, subject to payoff rebate rules |
| Key comparison risk | Confusing it with a true 0% APR | Comparing discount rate with a rate applied to net proceeds |
| Main evidence | Promotion disclosure, statements, card agreement | Note, amount financed, finance charge, APR, payment schedule |
The Deferred Interest guide also covers financing described as “no interest if paid in full” and explains payment allocation, minimum-payment risk, and the distinction from a 0% promotional APR.
The Discounted Loan guide owns discount-interest mechanics. It distinguishes interest withheld in advance from original issue discount, secondary-market pricing below par, mortgage discount points, and invoice discounts.
For deferred interest, verify the covered balance, regular APR, expiration date, payment allocation, and conditions for waiver. For discount interest, reconcile face amount, cash proceeds, prepaid finance charges, amount financed, APR, maturity payment, and unearned-interest rebate terms.
Do not use the word “discount” alone to infer loan economics. The signed agreement and disclosures establish whether the term describes interest withheld from credit proceeds, security pricing, or a different reduction.
Choose a subsection first. Deeper term pages live inside each subsection, which keeps large topic hubs readable.
Deferred interest is accrued finance charge that is waived only if a promotional balance is paid in full by the stated deadline.
A discounted loan deducts interest or another finance charge in advance, so the borrower receives less than the obligation's face amount.