What is interest?

Interest in economy terms It is defined as the data or index used to determine the profitability of a loan. This concept of interest also includes different types of indexes that help us calculate the savings, investments and costs of said credit.

The definition of an index implies a set of data, money and percentage with which each movement of capital converges. This arises from the need for an institution that requires the capture of certain resources. Thus, the interest will always be the result of the subtraction between the money that has been accumulating with respect to the money or the initial value.

The main interest rates

We find three types of interest that help us identify the amounts of money that are being obtained and with which it can be measured. Therefore, the interest rate offers an approximate relationship on how the money can be invested:

  • Fixed or variable interest. This interest rate is one that has been calculated through a rate and whose application will correspond to the period of time that a loan or deposit that has been requested has lasted.
  • Nominal interest. Abbreviated as TIN, is a percentage that is added to the capital that has been assigned during a selected period of time. They can be, for example, deposits that have been used by the hands of a bank, so that it is the change in the value of money, which is the result of the corresponding period of time that has been taken as a reference.
  • Equivalent annual rate. Also known as TAE, this interest provides information on earnings for the year. Therefore, through it, relevant data is obtained on how the financial performance is. Normally the APR implies the set of settlements that are carried out, especially with the products, although the APR also makes a solution to all those loans that are requested and that after them carry a type of commission, which can be both opening and cancellation.

Interest rate calculator

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