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

Sluggish growth, low interest rates and the vaporization of middle-class wealth after the 2008 financial crisis had robbed financiers of profitable deals in the Global North. —Hettie O'Brien, The Dial, 21 Apr. 2026

The plant, which was the state’s largest maker of panelized components, struggled under the weight of reduced demand because of higher interest rates and fluctuating lumber costs. —Aldo Svaldi, Denver Post, 21 Apr. 2026

Skryagin Igor/garrykosoff/Getty Images Mortgage interest rates in March surged by more than half a percentage point, on average, even with the Federal Reserve electing to keep its rate policy unchanged in the month. —Matt Richardson, CBS News, 21 Apr. 2026

Lower spending could also dampen inflation, prompting the Federal Reserve to lower interest rates in an effort to support growth. —Martha Shedden, Fortune, 21 Apr. 2026

Warsh strongly defended his independence from politics, trying to fend off tough questions about his financial disclosures and recent reversal on setting interest rates. —David Goldman, CNN Money, 21 Apr. 2026

But Warsh said Trump never asked him to commit to any interest rate decisions during his vetting process. —Zach Halaschak, The Washington Examiner, 21 Apr. 2026

Investors will be watching the hearing closely to see how Warsh balances Trump’s demands for lower interest rates as the war in Iran pushes up the price of gasoline, adding to inflationary pressures that already exist. —Christopher Rugaber, Chicago Tribune, 21 Apr. 2026

In recent months, however, Warsh has voiced support for lower interest rates, rebuking the Fed’s concern about inflation risk posed by a flurry of new tariffs issued last year. —Max Zahn, ABC News, 21 Apr. 2026

Word History

First Known Use

1846, in the meaning defined above