In simple terms, interest is what you pay a lender when you take out a loan. It’s additional money you need to pay back on top of the amount you borrow. Interest is usually calculated as a percentage of your loan amount and makes up part of each repayment you make.
The amount of interest you pay depends on:
- Your interest rate
- How much you borrow
- Your loan term
So, interest rates can vary from loan to loan.
When you apply for a loan, you’ll be shown the interest rate upfront as part of the process.