interest

thumb|right|upright=1.3|A bank sign in Malawi listing the interest rates for deposit accounts at the institution and the base rate for lending money to its customers In finance and economics, interest is payment from a debtor or deposit-taking financial institution to a lender or depositor of an amount above repayment of the principal sum (that is, the amount borrowed), at a particular rate. It is distinct from a fee which the borrower may pay to the lender or some third party. It is also distinct from dividend which is paid by a company to its shareholders (owners) from its profit or reserve,

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Interest is the extra money that a borrower pays to a lender (or that a bank pays to someone who deposits money) on top of the original amount borrowed or deposited. It matters because it's how lenders are compensated for letting others use their money, and it's a key factor that affects how much borrowing costs or how much savings can grow over time.

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Contents

History
Islamic finance
In the history of mathematics
Economics
Calculation{{anchor|Calculation of interest|Types of interest}}
Simple interest
Compound interest
Other formulations
Discount instruments
Rules of thumb
Rule of 78s
Rule of 72
Market interest rates
Opportunity cost and deferred consumption
Inflation
Default
Composition of interest rates
Default interest
Term
Government intervention
Open market operations in the United States
Interest rates and credit risk
Money and inflation
Liquidity
Theories of interest
Aristotle's view of interest
Development of the theory of interest during the 1600s and 1700s
Fructification theory
The classical theory of the interest rate
Keynes's criticisms
Theories of exploitation, productivity and abstinence
Wicksell's theory
Austrian theories
Pareto's indifference
Keynes's theory of the interest rate
Interest-free economy
See also
Notes
References
External links

For example, a customer would usually pay interest to borrow from a bank, so they pay the bank an amount which is more than the amount they borrowed; or a customer may earn interest on their savings, and so they may withdraw more than they originally deposited. In the case of savings, the customer is the lender, and the bank plays the role of the borrower.