economy

definition of interest

Interest is an index used in economics and finance to record the profitability of savings or the cost of credit.

Interest is the name given to the different types of index that are used to measure the profitability of savings or that are incorporated into the value of a loan.

Interest is a relationship between money and given time that can benefit a saver who decides to invest his money in a bank fund, or, that is added to the final cost of a person or entity that decides to obtain a loan or credit. Interest is calculated as a percentage and is often applied monthly or annually. That is, the interest allows a person who wants to generate income from their savings, can place them in an account at the bank, and this will give them a stipulated monthly profit according to the amount of money invested and the time during the who agrees to leave that amount in a fixed term, for example. On the other hand, if a company or individual has the need or desire to obtain loan money, the lender will apply an interest on the borrowed money that will depend on the time in which they commit to repay it and the amount of cash that is extended to the interested party.

There are two types of indicators that allow you to measure interest. The nominal interest rate or TIN, which is the percentage applied when making the interest payment. AND the equivalent annual rate or APR, which measures what the profit is at the end of a given year, in normalized form.

Interest is applied in all types of financial operations and is one of the most considered values ​​when carrying out economic transactions in the short, medium and long term.