[Glossary](https://pecuvo.eu/en/glossary/) · Credit and debt # Interest **In short:** interest is the price paid for using someone else's money — what a borrower pays a lender, or a bank pays a saver, for the time the money is with the other party. **Simply put:** when you borrow, you pay interest; when you save in a bank, you receive it. It is expressed as a percentage per year. With simple interest the percentage is applied only to the starting amount; with compound interest it is added to the amount and earns interest itself. **Example:** €1,000 at 5 % simple annual interest for 3 years earns €150 — €1,150 in total. If the same €1,000 is a loan, €150 is the price you pay for it. **Watch out:** interest is not the whole price of a loan. Fees and insurance come on top — so when borrowing, compare the APR and the total amount to repay. **Source:** Pecuvo Modules 7 and 22; Directive 2008/48/EC, Article 3(j) (definition of the borrowing rate) — https://eur-lex.europa.eu/eli/dir/2008/48/oj ## In depth in the modules - [Module 26](https://pecuvo.eu/en/modules/bank-and-financial-products/) - [Module 7](https://pecuvo.eu/en/modules/interest-compounding-capitalisation/) - [Module 22](https://pecuvo.eu/en/modules/credit/) ## Related terms - [Interest rate (borrowing rate)](https://pecuvo.eu/en/glossary/interest-rate/) - [Compound interest (compounding and capitalisation)](https://pecuvo.eu/en/glossary/compound-interest/) - [Principal](https://pecuvo.eu/en/glossary/principal/) - [APR (annual percentage rate of charge)](https://pecuvo.eu/en/glossary/apr/) - [Real and nominal interest rate](https://pecuvo.eu/en/glossary/real-interest-rate/) - [Deposit](https://pecuvo.eu/en/glossary/deposit/)