finance

What is interest?

 

What is interest?

The Bankrate.com financial term of the day is: "Interest."

Very interesting about the word "interest": it has two meanings as a financial term.

The first is the one you probably know about from banking. "Interest" refers to the cost of borrowing -- money you pay to use somebody else's money or money you charge someone who wants to borrow from you. The interest is typically a percentage of the amount borrowed and is paid over a specified time. For example, the borrower might have to pay 3 percent per year.

The other definition of interest applies when you own something, but not the whole shebang. Maybe you're the part owner of a piece of property, or hold some stock in a company. Your interest is how much of the thing you own. And again, we're talking about a percentage.

The investor had to pay 4 percent interest to take out a loan to buy a 50 percent interest in a nice piece of waterfront property.

For the best mortgage interest rates, visit the rate tables at Bankrate.com.

 

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