It enables the borrower to pay for things immediately, even if they cannot afford to pay for it themselves. Interest is the compensation required by the lender for the use of his/her money. There is a time value to money because of inflation, by way of an interest charge.

What is the Cost of Credit?
The cost, or charge, for using credit debt is called interest. This interest can either be simple interest or compound interest.

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  d. In exchange for the credit allowed, the lender will get back the money lent plus interest. The borrower has use of the money immediately, rather than waiting until the money required is saved up.

  It enables the borrower to pay for things immediately, even if they cannot afford to pay for it themselves. Interest is the compensation required by the lender for the use of his/her money. There is a time value to money because of inflation, by way of an interest charge.

  What is the Cost of Credit?
  The cost, or charge, for using credit debt is called interest. This interest can either be simple interest or compound interest.

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    money required is saved up.

    It enables the borrower to pay for things immediately, even if they cannot afford to pay for it themselves. Interest is the compensation required by the lender for the use of his/her money. There is a time value to money because of inflation, by way of an interest charge.

    What is the Cost of Credit?
    The cost, or charge, for using credit debt is called interest. This interest can either be simple interest or compound interest.

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      required by the lender for the use of his/her money. There is a time value to money because of inflation, by way of an interest charge.

      What is the Cost of Credit?
      The cost, or charge, for using credit debt is called interest. This interest can either be simple interest or compound interest.

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        ?
        The cost, or charge, for using credit debt is called interest. This interest can either be simple interest or compound interest.
        • Simple interest
          This is interest charged only on the principal amount borrowed. Simple interest does not add interest that's due, back on to the principal amount because it is usually paid out.
        • Compound interest
          This is interest charged, not only on the principal amount owing, but also on the interest that has been accrued on that principal amount. The interest is added on to the principal and then the new interest is calculated on the new total of those two items.

        What happens is that there is a compounding effect, so that interest is charged on the interest. The result is that the lender receives a higher and higher return because