Interest - National Guard Family Program

Introduction to Personal Finance
An Overview for State Family Program Directors, Wing Family Program Coordinators, and Families.

Introduction

Evaluating Your Situation

Budgeting & Debt Management

Goals & Plans

Insurance & Disability Planning

BUDGETING AND DEBT MANAGEMENT

2.	Introduction
	2.1	Why Do We Acquire Debt?
	2.2	Debt Can Become a Habit
	2.3	The Reality of Borrowing
	2.4	The Credit Trap
		2.4.1	Fees
		2.4.2	Rates
		2.4.3	Types of interest
	2.5	Eliminate and Avoid Debt
	2.6	Trimming Your Budget
	2.7	Learning Check

2.4.3 Interest

Discount Interest

Discount interest is another method used to calculate interest for an installment loan.

Interest and other fees are deducted from the amount borrowed before you receive the original amount of the loan.

Assume that you borrow $1000.00 at 5% for 1 year. The interest charged is $50.00 and if there are no other charges or fees, you will receive $950.00 from the lender. This is the amount that you will repay. The interest has been paid “up front.”