What is defined as a charge for the use of the lender's money?

Interest is defined as a charge for the use of the lender's money. When a borrower takes out a loan, they are using funds provided by the lender, and in return, they agree to pay a certain percentage of that borrowed amount as interest over time. This interest compensates the lender for the risk and the opportunity cost of lending their money to the borrower instead of using it for other investment opportunities. Interest is typically expressed as an annual percentage rate (APR) and is a fundamental part of any loan agreement, ensuring that the lender is compensated for the financing provided.

Loan origination fees are charges that lenders impose for processing a new loan application, while points refer to upfront fees that can be paid to reduce the interest rate on the loan. Principal is the original amount of money borrowed, which does not include any interest charges. Each of these terms plays a different role in the lending process, but interest specifically pertains to the cost of borrowing the lender's funds.