Interest

Interest is the price a borrower pay for the money landing. It is expressed as a percentage of the amount borrowed (interest rate) and can be calculated in two ways: simple interest or compound interest.

The interest can be understood as a king of rent for the money. The interest rate would be a compensation paid by the borrower to have the right to use the money until payday. The lender on the other hand, receives a compensation for not being able to use this money until payday and to run the risk of not receiving the money back (risk of default).

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