Just like it takes money to make money, it costs money to borrow money. It's the fee a lender charges a borrower for the use of assets. They are usually expressed as an annual percentage of the borrowed amount. Think of it as paying rent on the money you're borrowing. It incentivizes the bank (or any other lender) to lend to you ... thereby allowing you to purchase that car/house/Caribbean island you wouldn't be able to afford on your own. C'est la vie.