Difference Between Gross Interest And Net Interest

Difference Between Gross And Net Interest

The main dissimilarities or difference between gross interest and net interest can be described as follows:

1. Meaning

Gross Interest: Sum of amount paid for the use of capital, inconvenience and different types of risks.

Net Interest: Sum of amount paid for the use of capital or money only.

2. Concept

Gross Interest: It is wider concept

Net Interest: It is narrower concept

3. Part Or Unit

Gross Interest: It is not a part of net interest

Net Interest: It is a part or small unit of gross interest

4. Variation

Gross Interest: It varies according to the market

Net Interest: Generally, it remains constant

5. Nature

Gross Interest: It is practical in nature

Net Interest: It is theoretical in nature

6. Factors Of Determination

Gross Interest: Demand and supply of capital and other market related factors

Net Interest: Demand and supply of capital only

7. Calculation

Gross Interest: Net interest + reward for risk + reward for management + other charges

Net Interest: Gross Interest - reward for risk - reward for management - reward for inconvenience - other charges

Gross Interest Vs Net Interest (Comparison Chart)

Basis For Difference	Gross Interest	Net Interest
Introduction	Amount paid for the use of capital risks and inconvenience	Amount paid for the use of capital only
Type Of Concept	Broader	Narrower
Part Of Or Not	Not a part of net interest	Part of gross interest
Variation	Varies as per the market	Constant
Nature	Practical	Theoretical
Determinants	Demand and supply of capital and market factors	Demand and supply of capital
Calculation	Net Interest + reward for risk and management + other charges	Gross Interest - reward for risk and management - other charges

I hope this post is helpful to understand the difference between gross interest and net interest and to make comparison between them.