Interest is the compensation you receive when you lend money, or the amount you pay when you borrow money. It is therefore the price of money. Interest is usually expressed as a percentage per year.

The level of interest influences saving, borrowing and investing.

When you place money in a savings account, you receive interest from the bank. The bank uses that money to provide loans and earns interest on them as well. Conversely, you pay interest when you take out a mortgage or a personal loan. The general interest rate in a country is strongly influenced by the central bank, such as the European Central Bank.

Higher interest rates make borrowing more expensive and saving more attractive, while lower interest rates stimulate borrowing and are often positive for economic growth. Interest therefore also affects share prices and bonds.

Short example:

Disclaimer: Investing involves risks. Our analysts are not financial advisors. Always consult a professional advisor when making financial decisions. The information and tips provided on this website are based on the personal insights and experience of our analysts and are intended for educational purposes only.