Vig

From ForcaWiki, the simple encyclopedia

Picture someone running a betting pool who always keeps a small cut of every bet placed, no matter who wins. That little cut, the house's guaranteed reward for running the game at all, used to be called the "vigorish," shortened over time to just "vig."

In finance, vig has come to mean something a little different, though the spirit is similar: interest earned on an investment. It is a casual, informal word for the extra money a lender or investor collects on top of what they originally put in, the same basic idea as regular Interest on a Loan, just with a more colorful name.

Fun facts

• The word vig originally comes from gambling and loan sharking slang, long before it was used more casually to talk about ordinary interest.
• Calling interest a "vig" is informal. You are far more likely to hear it in casual conversation between financiers than written into an actual contract.
• Vig is ultimately just one more way of describing part of an investor's overall Return, the total reward they get back for putting their money to work.