The price charged for the use of borrowed money over time — the mechanism through which lenders are compensated for waiting, through which small debts can compound into large ones, and through which the economy's master price is set, steering investment and saving across the entire financial system.
Put $1,000 in an account earning 7 percent a year and leave it alone. After ten years you have nearly $2,000. After forty years you have more than $14,000. You did nothing. The money worked while you slept. This is the power of compound interest — and it is the same force, running in reverse, that can turn a manageable loan into an unpayable burden. Interest is not just a line on a bank statement. It is the price of time itself in money form. Almost everything in modern finance — mortgages, bonds, stock valuations, central bank policy — is built on top of it.