interest
IN-trist
/ˈɪntrəst/
Money paid regularly at a particular rate for the use of money lent, or for delaying the repayment of a debt.
In finance, 'interest' is the cost of borrowing money or the return on an investment. It's usually expressed as a percentage rate.
The story behind the word. The word 'interest' comes from the Latin 'inter esse,' meaning 'to be between' or 'to make a difference.' In medieval Latin, 'interesse' came to mean 'compensation for loss,' specifically referring to the difference between the value of something and its actual cost. This evolved into the financial sense of payment for the use of money.
Word relationships
- yield: Often refers to the income returned on an investment, typically expressed as a percentage.
- return: The profit from an investment.
- principal: The original sum of money lent or invested, on which interest is calculated.
Commonly confused with
- principal: 'Interest' is the cost of borrowing; 'principal' is the original amount borrowed.
Word family
- interested (adjective): Having a financial stake or involvement.
- uninterested (adjective): Not having a financial stake (also, not curious).
Collocations
- interest rate
- compound interest
- accrue interest
- pay interest
- high interest
- low interest
Idioms & expressions
- lose interest (in something, non-financial)
Example sentences
- "Even a small reduction in the interest rate can significantly lower monthly mortgage payments." Discussing mortgage payments.
- "Her savings account earns a modest amount of interest each year." Saving for the future.
- "The central bank decided to raise interest rates to combat inflation." From a financial news headline.
Memory hook
Think of 'interest' as the 'extra' money that is 'in-between' the original amount and the total repayment. Extra in-between
When not to use
Do not confuse this financial meaning with 'interest' as in 'curiosity' or 'a hobby.' The context usually makes the meaning clear.
Fun facts
- The prohibition of charging interest (usury) was common in many ancient cultures and religions, including early Christianity and Islam.
- Compound interest, where interest is earned on previously accumulated interest, is often called the 'eighth wonder of the world' due to its powerful growth effect.
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