Yes, that's correct! In a discount basis loan, the interest is calculated upfront and deducted from the total amount of the loan at the outset. As a result, the borrower receives a smaller amount than the face value of the loan.
For example, if you take out a loan for $10,000 with a 10% discount interest over a year, the interest (in this case, $1,000) is subtracted from the loan amount, meaning you actually receive $9,000 in cash. At the end of the loan term, you are still required to repay the full $10,000.
This method of calculating interest is common in certain types of loans like treasury bills, some lines of credit, or short-term loans. It's important for borrowers to fully understand how this type of interest calculation works, as it could affect the overall cost of borrowing.
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