Interest income

Interest income is the revenue earned by a lender or investor for providing funds or extending credit to borrowers, like a farmer reaping the bountiful harvest from their well-tended fields. This income, typically expressed as a percentage of the invested or loaned amount, represents the compensation received for the use of one's resources and the risk taken by lending money or investing in interest-bearing assets.

Example

Suppose an investor places $10,000 in a savings account with an annual interest rate of 2%. After one year, the investor will have earned $200 in interest income ($10,000 x 0.02). Similarly, a financial institution that lends money at a 5% interest rate will earn interest income from the borrowers as they repay their loans. Interest income is a primary source of revenue for banks, credit unions, and other financial institutions, as well as a way for individuals to earn a return on their savings and investments.