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Interest is the price paid by the borrower to the lender for the use of borrowed funds during a certain period”.

In the words of Eastham:

Interest is the payment for parting with the advantage of liquid control of money balances”.

According to Batch:

Interest is the price paid for the use of money or credit”.

It is normally expressed as a percentage on the funds loaned or borrowed.

In the words of J. M. Keynes:

Interest is the premium which has to be offered to induce people to hold their wealth in some form other than hoarded money”.


For example, if a man gives a loan of $1000 to a needy person for a year and charges 9% per annum as the price for the use of loaned funds, we say that the rate of interest is 9% per annum.

The payment which is generally made for the use of money or loan able funds is in fact a gross interest. Pure interest is only a part of the gross interest.