Interest Law and Legal Definition

Interest is subject to different meanings. In a financial context, interest is the money paid by someone else for the use of a person's money, as on a loan or debt, on a checking account in a bank, on a certificate of deposit, promissory note or the amount due on a judgment. It is stated as a percentage of the amount loaned. Federal laws govern the disclosure of interest rates to consumers by commercial lenders, such as banks.

Maximum interest rates on loans made by individuals are controlled by state usury statutes, which vary by state. To charge more than the maximum rate is usury, and a creditor guilty of usury may be unable to collect the interest through the courts. The maximum legal interest often granted by the courts on judgments is set by the law of the state. Simple interest is the annual rate charged for a loan, and compound interest includes interest upon interest during the year.

In other contexts, interest may refer generally to a person's stake in a matter, such as their interest in a lawsuit due to their rights involved which are in issue, or an interest in real property as defined by the extent of ownership or rights of use in such property.