What is the term for the fee a borrower pays to a lender for the use of borrowed money?

The term for the fee a borrower pays to a lender for the use of borrowed money is interest. Interest is essentially the cost of borrowing funds and is typically expressed as a percentage of the principal amount borrowed. When a borrower takes out a loan, the lender charges interest as compensation for the risk involved in lending money and the opportunity cost of not using those funds for other investments. This ensures that the lender earns a profit on the loan, which is a fundamental aspect of financial transactions.

Principal refers to the original sum of money borrowed or the amount that the borrower needs to repay, while fees are one-time charges that can be associated with taking out a loan, such as origination fees, but do not represent the borrowing cost itself. Collateral is an asset that a borrower offers to a lender to secure a loan, which can be seized if the borrower defaults, but it is not a fee paid for borrowing the money. Thus, interest is the correct answer as it directly defines the cost of the borrowed money.