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Interest Rate

Definition: The price of borrowing money, expressed as a percentage over a period.

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An interest rate is the price of using someone else's money, expressed as a percentage of the amount borrowed over a stated period — usually a year.

Two rates are only comparable when the period and the compounding match, which is where most confusion starts: a "2% monthly" rate is not 24% a year, it is closer to 27% once compounding is counted. When comparing loans, the rate alone is also incomplete, because mandatory fees change the real cost. That is what APR exists to capture.