Why does interest in money exist?

Question

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

Answer 1

When someone lends money to someone else, there’s always a risk that they won’t repay the loan, for various reasons. People can get sick and die, a venture might go bankrupt etc. So if I lend you money then I need to see some sort of incentive to counter that risk. That incentive is interest. If there was no interest, then overall I’d be losing money in lending due to people not repaying from time to time.