Interest is the cost paid by the borrower for using the lender’s funds or credit facility. In MSME lending, interest may be fixed, floating, benchmark-linked, spread-based, or subject to penal charges for overdue payments and limit irregularity. It directly affects EMI, cash-flow comfort, pricing adequacy, and borrower profitability. For example, a small change in interest rate can materially impact DSCR for a term loan with thin margins. Interest should be assessed together with processing fees, commission, renewal charges, and other finance costs to understand the true burden. This matters because a facility may look affordable at sanction but become stressful if rates rise or repayments are delayed. The common mistake is to discuss only the headline rate and ignore reset frequency, penal clauses, and effective annual cost.