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interest rate
[ in-ter-ist reyt, -trist ]
noun
- Business. the amount that a lender charges a borrower for taking out a loan, for maintaining a balance on debt, etc.: typically expressed as an annual percentage of the loan balance.
- Banking. the amount earned on a savings, checking, or money market account, or on an investment, such as a certificate of deposit or bond: typically expressed as an annual percentage of the account balance or investment sum.
interest rate
- The usual way of calculating interest â as a percentage of the sum borrowed.
yĐÄvlog History and Origins
Origin of interest rate1
Compare Meanings
How does interest rate compare to similar and commonly confused words? Explore the most common comparisons:
Example Sentences
Instead, all eyes will be on the Bank of England for its views on interest rates.
And US authorities may need to raise interest rates to combat the inevitable spike in inflation.
âAs long as interest rates are lower, borrowing costs are managed and as long as youâre paying back the debt.â
UK interest rates dictate the costs households have to pay to borrow money for things such as mortgages, credit cards and loans.
But ministers won't want to see a return of runaway inflation - the annual rise of prices - because that would inevitably lead to a rise in interest rates, and higher borrowing costs for businesses and individuals.
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More About Interest Rate
What does interest rate mean in banking?
Interest rate is the amount that is charged for a loan or purchase made on credit, typically expressed as an annual percentage of the loan or credit balance. The interest rate represents the cost to the borrower for taking out the loan or making a purchase on credit, and is the rate of return for the lender or creditor.
Most loans, mortgages, credit card balances, or purchases made on credit use simple interest, in which the interest rate applies only to the outstanding balance, without adding in or compounding the interest.
For example, if a loan of $1,000 carries an annual interest rate of 10%, then the borrower pays the lender $1,000 x 10% = $100 in interest during each year of the loan. As the balance is paid down, the amount of interest due goes down accordingly.
For credit cards, the interest rate may be stated as an APR (annual percentage rate) to indicate the amount of interest charged if the credit balance were carried for a full year.
Examples of interest rate in a sentence
âAn interest rate is the percentage of the principal (total amount of money borrowed) that lenders will charge you to borrow money from them.â
ââWhat Is A Good Interest Rate?â . Retrieved March 15, 2020.
âFixed interest rate loans lock in an interest rate that remains the same over the entire life of the loan.â
ââWhat Is A Good Interest Rate?â . Retrieved March 15, 2020.
âSince home equity loans are secured, borrowers tend to get a lower interest rate compared with personal loans.â
ââHome Equity Loan Vs. Personal Loan: Which Is Better For You?â . Retrieved March 15, 2020.
interest rate vs. APR
Interest rate and APR (annual percentage rate) are terms that are easy to confuse, as they are both annual percentage rates related to how much a loan will cost on top of the principal amount being borrowed.
The interest rate is the advertised rate of interest used in calculating the interest expense on a loan. The interest expense is the remaining balance (or principal) multiplied by the annual rate.
APR includes the interest expense as well as other charges or fees involved in getting the loan.
Other words connected with the topic of interest rate
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