What is the term for the percentage of a loan that is charged as interest to the borrower?

The term that specifically refers to the percentage of a loan that is charged as interest to the borrower is the interest rate. This is a crucial concept in lending, as the interest rate is the cost of borrowing money expressed as a percentage of the loan amount over a specified period. It directly influences the borrower’s monthly payments and the total cost of the loan over its duration.

The interest rate is distinct from other terms often used in lending. For instance, the annual percentage rate (APR) encompasses not only the interest rate but also other fees and charges associated with the loan, providing a broader picture of the total cost of borrowing on an annual basis. Similarly, the finance charge represents the total cost of borrowing including both the interest rate and any additional fees, giving a comprehensive view of what the borrower will pay. The loan origination fee is a specific charge for processing the loan application and does not pertain directly to the interest charged on the principal amount borrowed. Each of these terms plays a vital role in understanding the financial obligations of a borrower, but the interest rate specifically denotes the percentage charged purely as interest.