Interest Cost


DEFINITION of 'Interest Cost'

The cumulative sum of the amount of interest paid on a loan by a borrower. This amount should include any points paid to reduce the interest rate on a loan, since points are in effect pre-paid interest. Additionally, any negative points or rebates paid by a lender to a borrower should be subtracted from the interest cost as they are in effect a refund of future interest the borrower will pay on the loan.

BREAKING DOWN 'Interest Cost'

Interest cost is one measure of loan economics. However, other measures such as lender fees and loan closing costs, tax benefits and consequences, principal reduction, and opportunity costs in the form of re-investment rates should also be included in a thorough analysis of loan choices.

  1. Interest

    The charge for the privilege of borrowing money, typically expressed ...
  2. Interest Expense

    The cost incurred by an entity for borrowed funds. Interest expense ...
  3. Compound Interest

    Compound Interest is interest calculated on the initial principal ...
  4. Mortgage

    A debt instrument, secured by the collateral of specified real ...
  5. Discount Points

    A type of prepaid interest mortgage borrowers can purchase that ...
  6. Interest Coverage Ratio

    A debt ratio and profitability ratio used to determine how easily ...
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  1. Are secured personal loans better than unsecured loans?

    Secured loans are better for the borrower than unsecured loans because the loan terms are more agreeable. Often, the interest ... Read Full Answer >>
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    Personal loans from friends, family and employers fall under common categories of debt that can be discharged in the case ... Read Full Answer >>
  3. Can Sallie Mae loans be consolidated?

    Sallie Mae loans can be consolidated with other federal loans, but not with private loans. For federal loan consolidation, ... Read Full Answer >>
  4. How does Sallie Mae disburse funds?

    Sallie Mae is the number one provider of financial aid and student loans in the United States, servicing over 25 million ... Read Full Answer >>
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    Sallie Mae is the biggest provider of financial aid and student loans in the United States. The company operates as a private ... Read Full Answer >>
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