What is typically charged by creditors for lending money?

Interest is the cost associated with borrowing money. When creditors lend money, they charge interest as a fee for the privilege of using their funds over a specified period. This interest is usually expressed as a percentage of the principal amount borrowed and is calculated over a set term.

The other options refer to fees that may apply in specific circumstances but do not characterize the general cost of borrowing. A service fee might be charged for managing an account but is not a direct cost of the loan itself. A penalty fee typically refers to charges incurred for late payments or breaching terms of the loan agreement rather than the standard cost of borrowing. An application fee may be charged for processing a loan application but does not relate to the cost of borrowing money over time. Therefore, interest is the most relevant and accurate answer to the question regarding what creditors charge for lending money.