A unique loan situation where an interest rate is determined, and then that percentage is removed from the loan amount, and the borrower is given the remainder of the loan. All of the interest is paid at once, at the beginning. For example, in a discount interest scenario, if a borrower is borrowing $1000 with 5% interest rate, $50 in interest is removed at the very beginning, and the borrower is able to borrow $950.

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