Financial glossary
Interest Rate
An interest rate is the percentage used to calculate the cost of borrowing or the growth of eligible savings over a stated period.
What an interest rate means
A rate must be read together with its time period and calculation method. An annual rate is not simply the amount charged or earned every month.
Interest rate in borrowing
For reducing-balance loans, periodic interest is applied to the outstanding balance. The quoted rate, compounding convention, and repayment timing affect the result.
Interest rate in deposits
Deposit projections apply a stated rate using a compounding frequency. Actual maturity can differ because of product rules, taxes, premature closure, and rounding.
Simple example
A 10% annual input in a monthly loan calculation is converted to a periodic rate before the repayment formula is applied.