Interest income

Interest income is the revenue a lender or investor earns for providing funds or extending credit to borrowers. It is usually expressed as a percentage of the amount invested or loaned. It reflects the payment received for the use of capital and the risk of lending money or holding 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 earns $200 in interest income ($10,000 x 0.02). In the same way, a financial institution that lends money at a 5% interest rate earns interest income as borrowers repay their loans. Interest income is a main source of revenue for banks, credit unions, and other financial institutions. It is also a way for individuals to earn a return on savings and investments.