Interest is a percentage fee that you pay to your creditor in exchange for the money they lend, or that you pay because you didn’t pay a bill on time. For example, you might be charged interest each month on a student loan, credit card balance, or mortgage. In addition to interest, you may also have to pay other late fees.
The amount of interest that is charged each month is usually a set percentage of the money you have been lent. The percentage is called an “interest rate”.