Welcome to the SmallBusiness.com WIKI
The free sourcebook of small business knowledge from SmallBusiness.com
Currently with 29,736 entries and growing.

WIKI Welcome Page
Local | Glossaries | How-to's | Guides | Start-up | Links | Technology | All Hubs
About · Help Hub · Register to Edit · Editing Help
Twitter: @smallbusiness | Facebook | Pinterest | Google+


In addition to the information found on the SmallBusiness.com/WIKI,
you may find more information and help on a topic
by clicking over to SmallBusiness.com and searching there.

Note | Editorial privileges have been turned off temporarily.
You can still use the Wiki but cannot edit existing posts or add new posts.
You can e-mail us at [email protected]


SmallBusiness.com: The free small business resource
Jump to: navigation, search

In finance, interest has three general definitions.

  • Interest is a surcharge on the repayment of debt (borrowed money).
  • Interest is the return derived from an investment.
  • Interest is the right to one's claim in a corporation, such as that of an owner or creditor.

In economics, interest is the return to capital achieved over time or as the result of an event.

In population dynamics the rate of population growth (the interest rate) is sometimes referred to as the Malthusian parameter.

This article covers the "financial" use of the term.

In common use the term "interest" is seen as rent paid for the use of money. As with any rental, the market price (or rate) is subject to change to reflect market conditions. The fraction by which the balances grow is called the interest rate. The original balance is called the principal. Interest rates are very closely watched indicators of a financial market, and have a dramatic effect on finance and economics.

The fact that lenders demand interest for loans can be attributed to the following reasons:

  • Time value of money or time preference
    • (TVM: Having money now is more valuable than having it at some future time because interest is earnt)
    • (TP: Interest is the value borrowers place on having money now)
  • Opportunity cost
    • (OC: The cost in terms of options no longer available once one particular option is chosen)


This entry includes content from the following Wikipedia article: Interest

See Also

SB glossary new.jpg
This term or phrase is currently an entry in The SmallBusiness.com Business Glossary WIKI. Please help expand this entry into a more detailed description.