Interest is the cost of borrowing money or the return earned on money that is saved or invested. When someone borrows money, they usually have to pay back the original amount (called the principal) plus an additional amount known as interest. This additional payment compensates the lender for the use of their money.
Interest is typically calculated as a percentage of the principal and is often expressed as an annual rate, known as the interest rate. For borrowers, interest represents the price of accessing funds through loans, credit cards, or other forms of financing. For savers and investors, interest is the income earned from depositing money in savings accounts, bonds, or other interest-bearing investments.
The amount of interest paid or earned depends on factors such as the interest rate, the amount of money involved, and the length of time the money is borrowed or invested.