Loading…
Loading…
GCSE Business · key term
The charge paid for borrowing money.
Used by Edexcel and OCR
Specification 1.3.2, 1.3.4, 2.4.1 · Paper 1, Paper 2
The charge for borrowing money, or the reward for saving money. Loan interest can be expressed as a percentage of the amount borrowed.
Revise: Revenues, Costs, and ProfitsInterest is the lender’s charge for that borrowing. The total repayment includes both the original borrowed amount and the interest. Interest can also be a reward paid to savers.
Develop the consequence: loan interest increases costs, while regular repayments create cash outflows that the business must be able to afford.
For loan interest calculations, divide total interest by the original amount borrowed, not by total repayments. The specification formula gives the percentage over the whole loan period, not an annual rate.
Explain consequences rather than just listing advantages: interest increases costs, while bringing in another owner means sharing profits and control.
Create a free account to read GCSE Business revision notes for your exam board and track your progress.
The charge a business pays for borrowing money.
Paper 2
Revise: Methods of Raising FinanceA business can obtain it from its owners, reuse money generated by trading, sell something it owns, borrow, or attract new investors. These routes have different consequences: some create repayments and interest costs, while others require the existing owners to share profits and control.