The difference between the face value of a loan and the cost of acquiring the loan. 

For example, if a $5,000 loan was acquired for $4,000, the $1,000 difference is the discount. This refers to an amount of principal that was withheld by the lender when a loan was funded. This amount is, by definition, part of the principal balance on a loan before it is paid, but it becomes a revenue to the lender when the principal is paid back.