Calculating Interest

What is interest?

When you take out a loan, whether it’s a car loanhome loan or credit card, you’ll have to pay back both the amount you borrowed and interest on top of it. But what do we mean by that?

Well, essentially, interest is a fee you pay for using someone else’s (usually the bank’s) money. It’s how lenders make profit from giving out loans – after all, they’re not in it out of the goodness of their hearts.

Usually the repayments you make on a loan will be made up of two parts: the part that reduces your balance to pay off your loan, and the part that covers the interest on the loan.