Interest in Advance: What is interest in advance? Interest in advance is the pre-payment of interest for a set term (normally 1 year). Basically, the interest for 365 days is calculated and paid to the bank in a lump sum in advance. Why would I pay interest in advance? There are 3 main reasons why one would pay interest in advance; 1) Convenience If you are living and working overseas it can be very convenient to pay the interest upfront in one lump sum and then forget about making repayments for the rest of the year. Keep collecting the rent in a separate account and then use to pay interest in advance in the following year. 2) Discounted rate Most lenders give an interest rate discount when paying interest in advance of normally 0.1-0.2% off the rate. Another advantage is that, as you have paid interest in advance no repayments are required. 3) Taxation benefits If the loan is an… Read More