A fuller guide to this term is on the way. In the meantime, the related terms below explain the ideas around it.
Related MoneyPedia terms
- APR (Annual Percentage Rate)The yearly cost of borrowing money on a loan or credit card, stated as a percentage that includes interest and certain fees.
- APY (Annual Percentage Yield)The real yearly return on a deposit, including the effect of compounding, which makes it the fairest way to compare account rates.
- Fixed Interest RateA rate that stays the same for the life of a loan, so your payment amount does not change over time.
- Variable Interest RateA rate that can rise or fall over time based on a benchmark index, which changes how much you owe each month.
- Compound InterestInterest that earns interest — the engine behind long-term growth.
- PrincipalThe original amount of money you borrow, separate from the interest and fees that get added on top of it.
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Plain-English education — not personalized legal, tax, or investment advice.