A rate which is charged
for the use of money
. An interest
rate is often expressed as an annual
percentage of the principal
. It is calculated by dividing the amount
of interest by the amount of principal. Interest rates
as a result
and Federal Reserve Board policies
. For example, if a lender
(such as a bank
) charges a customer
$90 in a year on a loan
of $1000, then the interest rate would be 90/1000 *100% = 9%.
From a consumer's perspective, the interest rate is expressed as annual percentage yield (APY) when the interested is earned, for example, from a savings account or a certificate of deposit. When the interest is paid, for example, for a credit card, a mortgage, or a loan, the interest rate is expressed as annual percentage rate (APR).
For more information, see: Difference Between Interest Rate and APR.
Use interest rate in a sentence