Compounding period definition
/What is a Compounding Period?
A compounding period is the span of time between when interest was last compounded and when it will be compounded again. When interest compounding occurs, interest is added to the principal on a loan. A shorter compounding period results in a larger amount of interest being payable to the lender.
For example, annual compounding means that a full year will pass before interest is compounded again. A lender may engage in more aggressive monthly or quarterly compounding, which increases the amount to be repaid by the borrower.