Interest is the money paid by a borrower to the lender for the use of money borrowed.
In other words the additional money paid for using other’s money is called interest.
Some Key Things about Interest
Principal or Sum
Principal or sum is the money that borrowed or lent out for a certain period.
It is the duration of period for which the money is borrowed.
The sum of Principal and Interest is called Amount.
|Amount = Principal + Interest|
Rate of Interest
It is the Interest rate of the principal for a certain period.
For ex; Interest of 9% per Annum.
It means, the interest on principal of Rs. 100 for one year is Rs. 9.