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Cost of borrowing

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When you take out a loan, you borrow money. The total cost of the loan is the amount of money that you borrow plus the interest that you have to pay on that loan. Therefore, cost of borrowing refers to the principal amount of the loan + the interests + the fees that you have to pay for that loan and the total amount equals what is called cost of borrowing. The cost of borrowing must be disclosed clearly to borrowers before closing the transaction.