Interest

Interest, money paid for the use of money loaned. It is generally expressed as a percentage of the principal (sum loaned) per period (usually per year or per month). In simple interest, interest is calculated on the basis of the sum loaned. In compound interest, interest is paid on the principal plus the accumulated interest, recalculated periodically. Actual payments for compound interest are thus higher (and more complex to calculate). Discount interest is subtracted from the principal before the money is given to the borrower.