What is it for and why? I found a lot of questions on interest rate but not what interest itself is
Thanks in advance 🙂
Edit: Thank you for all the replies i am now a financial god of wisdom, i’m not going to reply to unless something is unclear to me but comments will all be read
In: 9
Interest is the name for the money you pay someone to borrow money from them.
If you borrow money to buy a car, you’re going to pay the lender some extra for loaning you the money.
If you buy a government bond, you’re loaning the government money and they promise to pay you back, plus a little extra.
If you have money in the bank, and they pay you interest it’s because they can use that money to loan out to other people. The bank will give you back your money whenever you ask, but in the meantime they’re using your money and giving you a small cut of the profits.
If you owe the IRS money and don’t pay it, they’ll charge you interest. The money you owe but haven’t paid is like you borrowing money from them; they’re charging you a fee for that money you’ve “borrowed”.
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