What are interests?

Interest is what is charge to a person or entity who borrows money, and it is often expressed as a monetary amount. While, the rate used to calculate this interest is expressed as a percentage.

But interests from the other perspective is perceived as the amount of money a "lender" receives from lending out money. And finally, can also refer to the ownership amount a stockholder (someone) has in a company.

Interests compensate one side of the agreement for risking their funds, while penalizing the other side for using those funds that are not of their ownership.

The person that temporary lends their money is compensated (the interest) with extra amount of money for the action, so the other person is the one who is required to pay for this compensation.

Did you knew that when you leave some money in a specific saving account, then that account is credited interests? So, you recieve money for lending your money indirectly, this is because the bank uses that money from the account and loans it to their other clients. So that profit not only benefits the bank, but yourself.

Furthermore, the amount of interest a person must pay is often tied to their creditworthiness, the length of the loan, or the nature of the loan....

But wait, it may sound a little complex, let me expain it:

- Your "creditworthness" refers to how much you are suitable to receive financial credit (money) based on if you have paid the money lend to you in the past.

- The lenght of the loan is in simple words, how much time you have to repay the money you have received.

- The nature of the loan refers to the specifit terms or characteristics determined in the agreement (the action of the money borrowing).

And among all else, interests and interests rates are higher if the risk is greater. Because the lender faces that the borrower is not reliable to be able to pay the money back.