interest rate

noun

plural interest rates

: a rate (see rate entry 1 sense 1b) that is used to calculate simple interest or compound interest

an annual interest rate of 5%

:

a

: a rate that a lender (such as a bank) charges a borrower for a loan

Interest rates can be considered the price of borrowing money. "Quite simply, it's the amount charged to a borrower by a lender for use of an asset, expressed as a percentage of the principal value," says Peter C. Earle …

—Dawn Papandrea

Federal student loans have fixed interest rates, which means that the interest rate will stay the same for the life of the loan.

—Zina Kumok

Variable interest rates can go up, increasing your costs. The monthly loan payment will increase and the interest you pay will increase.

—Mark Kantrowitz

b

: a rate that is paid (as by a bank, government, or corporation) to an investor for the use of the money invested

Series I [government] savings bonds … are currently offering an interest rate of 9.62%.

—Darla Mercado

Another option is putting money in CDs, which generally offer higher interest rates than savings accounts.

—Jessica Merritt and Greg Garrison

Since August, … interest rates on corporate bonds have fallen relative to yields on comparable Treasury securities …

—Sewell Chan

Let's say you put $2,000 into an account with a simple interest rate of 2%. At the end of one year, you would earn $40 in interest if you didn't add or take out any money. That's because 2% of $2,000 is $40.

—Kate Rockwood

Take, for example, a person starting with $1,000 in a money market fund earning 5 percent per year. … After one year, the $1,000 has grown to $1,050.95, making the compound interest rate actually 5.095 percent—not 5.00 percent—because interest was also paid on the accumulated interest for each quarter.

—Patricia Barnes-Svarney and Thomas E. Svarney

Examples of interest rate in a Sentence

Recent Examples on the Web

That rising ratio of home price to income, coupled with elevated interest rates, has put homeownership out of reach for millions of millennial (born between 1981 and 1996) and Gen Z (born in 1997 or later) Americans. — Phillip M. Bailey, USA Today, 3 July 2026

By way of example, Bäte notes that Allianz did not fully foresee the speed with which interest rates rose after Russia’s full invasion of Ukraine in 2022. — Andrew Edgecliffe-Johnson, semafor.com, 3 July 2026

In a high-debt environment, even a modest increase in interest rates can add a significant fiscal burden. — Tristan Bove, Fortune, 2 July 2026

Mortgage rates are influenced by several factors, from the Federal Reserve’s interest rate policy decisions to bond market investors’ expectations for the economy and inflation. — ABC News, 2 July 2026

Lower interest rates expand profitability and are generally more politically popular than higher rates, but can undermine broader price stability in the economy when applied too broadly. — Dan Mangan,luke Fountain,kevin Breuninger,garrett Downs,ashley Capoot,justin Papp, CNBC, 2 July 2026

Beginning in late 2021, investors aggressively sold off software firms, citing overspending and rising interest rates. — Kirk Ogunrinde, Forbes.com, 2 July 2026

Word History

First Known Use

1846, in the meaning defined above

Rhymes for interest rate

• abbreviate
• accelerate
• accommodate
• accumulate
• acuminate
• adjudicate
• adulterate
• affiliate
• agglomerate
• agglutinate
• alleviate
• amalgamate