Interest

Interest is a fee that a borrower pays to a lender for the use of assets. Usually, the asset that is borrowed is cash. In addition, interest is often earned through savings accounts and other deposits at commercial banks. The amount of interest varies and is usually referred to as the Annual Percentage Rate (APR). Interest is ordinarily paid as a percentage of the principal over a certain period of time. The amount of interest that is charged affects the total cost that a borrower pays for the use of money. In the mortgage industry, the interest rate affects the monthly payment, and there is an easy way to see how much interest actually costs the borrower. The Rule of 72 is often used in economics and shows how fast interest compounds. When an interest rate is divided by 72, the answer is the amount of time that it takes for the original principal to double.