What is the fee charged by the bank for borrowing money called?

The fee charged by the bank for borrowing money is referred to as interest. Interest represents the cost of borrowing and is typically expressed as a percentage of the principal amount, which is the original sum of money borrowed. When a borrower takes out a loan or a mortgage, they agree to pay back not only the principal but also the interest charged by the lender for providing the funds. This interest is a key component of loan agreements and is crucial for lenders to earn a return on their investment.

Understanding the concept of interest is fundamental for borrowers as it affects the total cost of the loan over time. The interest rate can vary based on the type of loan, the lender, the borrower's creditworthiness, and prevailing market conditions. Knowing how interest functions helps borrowers make informed decisions regarding their financing options.

In contrast, principal refers to the actual amount of the loan, the origination fee is a one-time charge for processing the loan, and a late fee may be assessed for payments made past the due date. Therefore, while all these terms relate to borrowing, interest specifically denotes the fee for accessing borrowed money.