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
I have some money. I like having that money. You don’t have money. I can lend you some money, but then I wouldn’t have my money anymore. You would have it (until you paid me back). Also, there’s a chance that you might not pay me back.
In order to persuade me to lend you the money, you promise to pay me back more than you borrowed. That’s interest. If you seem very likely to pay the money back, then you’re going to have to pay a little extra money back. If you seen less likely to pay the money back, the. You’re going to have to pay more extra money to convince me to lend it to you.
(Time value of money and inflation and opportunity costs are also factors that influence the interest rate that a borrower will pay, but those would be eli12 at least)
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