interest
Also called: bunga pinjaman
An additional cost paid by a borrower on money borrowed.
What it means
Loan interest is an additional cost paid by the borrower to the lender, calculated as a percentage of the debt principal. Interest is the reward for the party lending the money and covers risk and service costs. In family credit, interest determines how much more must be paid in total compared with the original loan amount.
Why it matters for families
Interest makes the total payment always larger than the loan principal, so a family needs to compare offers before borrowing. A small percentage difference can have a big impact on total cost, especially for long tenors. Ignoring interest often makes a family feel a loan is cheaper than it really is.
Example
For example, a family borrows Rp20 million at 12 percent interest per year with a two-year tenor. Interest adds cost that must be paid on top of the principal, so the total installment is higher than Rp20 million. They compare several offers before choosing.
Common misunderstanding
Many people assume interest is only about the monthly percentage. The correction: the calculation method and tenor determine the total cost, so the percentage figure alone is not enough to judge whether a loan is cheap or expensive.