Interest is the price borrowers pay to lenders for the use of their money.
It allows borrowers to make purchases that they could not afford if they had to pay immediately. Interest is calculated as a percentage of the loan amount. Interest is based on the concept that lenders are entitled to a return on their investment. Interest compensates a lender for giving up their right to use the money for a period of time or to use that money to generate profit in other ways. Interest plays an essential part in commerce.