Interest (finance)

Interest is money paid by a borrower to a lender for using funds, or income earned by lending or investing them. It is commonly stated as a percentage of principal over a period of time.

Principal (finance): The original amount of money borrowed, lent, or invested, excluding interest. Interest is calculated in relation to this starting amount.
Mortgage: A loan secured by real estate, typically repaid through scheduled payments over many years. Mortgage payments combine repayment of principal with interest charges.
Time value of money: The principle that money available now differs in value from the same amount available later. Interest compensates for delaying access to money and reflects its alternative uses.
Usury: The practice of lending at interest rates considered excessive or legally prohibited. Usury debates concern when interest charges cross legal or ethical limits.
Interest rate: The proportion of principal charged or earned as interest over a specified period. It sets the rate at which interest accrues on the principal.
Credit card interest: Interest charged on a credit-card balance that remains unpaid under the account's terms. It illustrates how revolving borrowing can make interest accumulate rapidly.
Discount rate: A rate used to convert future cash flows into present values. It is mathematically connected to interest rates through the valuation of money across time.
Fee: A payment charged for a service or transaction rather than for the use of borrowed money. Fees can raise borrowing costs but are distinct from interest itself.
Simple interest: Interest calculated only on the original principal, without adding prior interest to the base. It shows how interest accrues when unpaid interest does not compound.
Savings account: A deposit account that holds cash and may pay interest to its owner. The account holder earns interest by allowing a bank to use deposited funds.

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