Interest is fundamental to the function of banking and finance. The idea of interest is central to how people borrow and lend: When you borrow money, you repay a predetermined amount on top of what you were loaned. when you lend money, you stand to earn interest on the money lent out. it's important to look at the different types of interest you could be repaying back. Using your own words show the differences on the types of interests charged on financial products by financial institutions.