What Is Prepaid Interest?

Prepaid interest is the advance payment of interest in credit business. Originally, interest was paid after a certain period of time for deposits or loans. However, in order to increase the attractiveness of depositors or borrowers to obtain loans in a timely or expected manner, they often adopt the method of prepaid interest. In a general sense, any advance payment of interest that occurs in the deposit and loan business can be regarded as prepaid interest. In addition to cash payment, some other forms are also prepaid interest in nature. For example, with bonus savings, the prize is paid to the depositor when the deposit has not expired. The prize is actually part or all of the interest. ^[1]