In the financial dictionary, the most common explanation of the word interest is: interest is the financial reward for borrowing money. Interest is the financial reward for lending money.
Amount of interest
The amount of interest you pay depends on how much you borrow and how long you repay the money you borrow (the so-called principal). The creditworthiness of the borrower also plays a role in the amount of interest required. Riskier borrowers will pay more in interest. Higher interest rates are to be expected for unsecured loans, for example for the purchase of washing machines, televisions and other consumer goods. The highest interest rates are now required for so-called micro-loans, which are usually loans of a few thousand crowns for a few weeks or months.
The interest rate is one of the basic parameters of any loan. It is expressed as a percentage and indicates the increase in the amount borrowed over a certain period. The interest rate is most often calculated over a period of one year (e.g. 7% p.a.). When evaluating the profitability of the loans offered, it is preferable to look at the APR. In addition to the amount of interest, it also includes other costs associated with the loan (e.g. arrangement fee, maintenance of the loan account, etc.).