What is the price a borrower pays a creditor for the use of money called?

The price a borrower pays a creditor for the use of money is termed "interest." This is essentially the cost incurred when borrowing money, representing the lender's compensation for the risk of lending, as well as for the opportunity lost by not using that money for other investments or expenses. Interest can be expressed as a percentage of the principal amount borrowed over a specified period of time.

Understanding this concept is crucial in personal finance, as it affects how much a borrower will ultimately pay back over the life of a loan, in addition to the principal amount. Knowledge of interest also plays a significant role when evaluating different borrowing options, such as loans, mortgages, or credit cards, enabling borrowers to make more informed financial decisions.