Interest: simply how much is paid for the usage money ( as being a per cent, or a quantity)
Individuals can invariably look for a usage for the money, so that it costs to borrow cash.
Simply how much does it price to borrow funds?
Different places charge various quantities at differing times!
Nonetheless they frequently charge that way:
Being a percent (per year) for the quantity lent
Example: Borrow $1,000 through the Bank
Alex would like to borrow $1,000. The neighborhood bank says "10% Interest". Therefore to borrow the $1,000 for 1 will cost year:
$1,000 Г— 10% = $100
In cases like this the "Interest" is $100, additionally the "Interest Rate" is 10% (but individuals frequently state "10% Interest" without saying "Rate")
Needless to say, Alex will need to pay off the initial $1,000 after 12 months, and this is exactly what occurs:
This is the concept of Interest . spending money on the usage of the funds.
You will find unique terms utilized whenever money that is borrowing as shown here:
Alex could be the Borrower, the lender may be the Lender
The key for the Loan is $1,000
The Interest is $100
Year more Than One .
Imagine if Alex wished to borrow the income for just two Years?
In the event that bank fees "Easy Interest" then Alex simply will pay another 10% when it comes to extra 12 months.