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LSDefine
Simple English definitions for legal terms
rediscount
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A quick definition of rediscount:
Term: REDISCOUNT
Definition: Rediscount is when a bank discounts a negotiable instrument that has already been discounted. This means that the bank is buying the instrument at a lower price than its face value. Sometimes, the bank may also sell the discounted instrument to another bank or investor.
A more thorough explanation:
Definition: Rediscount is the process of discounting a negotiable instrument that has already been discounted by a bank. It can also refer to a negotiable instrument that has been discounted a second time.
Example: A company receives a $10,000 check from a customer, which they deposit into their bank account. The bank then discounts the check, giving the company $9,500. Later, the company needs more cash and decides to use the discounted check as collateral for a loan. The bank agrees to rediscount the check, giving the company an additional $9,000.
This example illustrates how a negotiable instrument (the check) can be discounted twice through the process of rediscounting.