Interest expense

When you borrow money or buy something on credit, you will be charged "interest." This is a premium you must pay for the use of another's capital. Interest is generally expressed as a certain percentage of the principal, per year. As you pay off a loan, a portion of each payment goes toward decreasing the principal (the dollar amount borrowed) and a portion goes toward paying off interest. The portion that goes to pay off the interest is the "interest expense."