Investing term

What is Interest rate?

The cost of borrowing money, or the reward for lending it, expressed as a percentage.

An interest rate is the price of money — what you pay to borrow it or earn to lend it, expressed as an annual percentage. Rates ripple through everything: they set the cost of debt, the return on savings, and the discount rate used to value stocks and bonds. When central banks move rates, asset prices across the board tend to move with them.

For example

At 20% interest, $1,000 of credit-card debt costs $200 a year — which is why clearing high-rate debt often beats any investment return.

Interest rate is taught hands-on in Stage 1 — Money, Goals & Your Financial Foundation.

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Related terms

APRAnnual Percentage Rate. The yearly interest cost of a loan, including most fees.CompoundingWhen your returns earn returns of their own, so money grows faster the longer it's invested.Emergency fundCash reserved for unexpected expenses, usually 3–6 months of your usual spending.Employer matchFree money from an employer that matches part of what you contribute to a workplace retirement plan.
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