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
Dawn PapandreaFederal student loans have fixed interest rates, which means that the interest rate will stay the same for the life of the loan.—Zina Kumok
Zina KumokVariable interest rates can go up, increasing your costs. The monthly loan payment will increase and the interest you pay will increase.—Mark Kantrowitz
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
Darla MercadoAnother option is putting money in CDs, which generally offer higher interest rates than savings accounts.—Jessica Merritt and Greg Garrison
Jessica Merritt and Greg GarrisonSince August, … interest rates on corporate bonds have fallen relative to yields on comparable Treasury securities …—Sewell Chan
Sewell ChanLet'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
Kate RockwoodTake, 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
Patricia Barnes-Svarney and Thomas E. SvarneyExamples of interest rate in a Sentence
Recent Examples on the Web
Families that have been priced out of the market are able to use Habitat’s below-market interest rate loans and down payment assistance.
—Kamal Morgan, Fort Worth Star-Telegram, 16 June 2026
In theory, a resilient labor market could afford central bankers leeway to raise interest rates in an effort to dial back inflation, since elevated borrowing costs risk a hiring slowdown.
—Max Zahn, ABC News, 16 June 2026
In response, the Federal Reserve has kept interest rates relatively high, raising borrowing costs for businesses and consumers alike.
—Faith Wakefield, USA Today, 16 June 2026
What will the Fed do with interest rates?
—Aimee Picchi, CBS News, 16 June 2026
However, as these extensions hit their hard limits, borrowers who locked in interest rates in the range 4.1%-to-4.7% during the low-rate era must now refinance at rates in the range 5.4%-to-8.7%.
—Hersh Shefrin, Forbes.com, 4 June 2026
All of this means that Peru, unlike other countries in the region, can afford to pay its debts while borrowing money at relatively low interest rates.
—Daniel Alarcón, New Yorker, 4 June 2026
Pace’s downsizing comes after several years of market contraction driven by economic and global uncertainty, high interest rates, Trump’s trade war, and conflicts in the Middle East and Ukraine.
—Devorah Lauter, ARTnews.com, 4 June 2026
The avalanche method focuses on mathematical efficiency – those with debt allocate every extra dollar to the balance with the highest interest rate while paying the minimums on the rest.
—Ali Besharat, The Conversation, 4 June 2026
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Kamal Morgan, Fort Worth Star-Telegram, 16 June 2026
In theory, a resilient labor market could afford central bankers leeway to raise interest rates in an effort to dial back inflation, since elevated borrowing costs risk a hiring slowdown.
—Max Zahn, ABC News, 16 June 2026
In response, the Federal Reserve has kept interest rates relatively high, raising borrowing costs for businesses and consumers alike.
—Faith Wakefield, USA Today, 16 June 2026
What will the Fed do with interest rates?
—Aimee Picchi, CBS News, 16 June 2026
However, as these extensions hit their hard limits, borrowers who locked in interest rates in the range 4.1%-to-4.7% during the low-rate era must now refinance at rates in the range 5.4%-to-8.7%.
—Hersh Shefrin, Forbes.com, 4 June 2026
All of this means that Peru, unlike other countries in the region, can afford to pay its debts while borrowing money at relatively low interest rates.
—Daniel Alarcón, New Yorker, 4 June 2026
Pace’s downsizing comes after several years of market contraction driven by economic and global uncertainty, high interest rates, Trump’s trade war, and conflicts in the Middle East and Ukraine.
—Devorah Lauter, ARTnews.com, 4 June 2026
The avalanche method focuses on mathematical efficiency – those with debt allocate every extra dollar to the balance with the highest interest rate while paying the minimums on the rest.
—Ali Besharat, The Conversation, 4 June 2026
Cite this Entry
“Interest rate.” Merriam-Webster.com Dictionary, Merriam-Webster, https://www.merriam-webster.com/dictionary/interest%20rate. Accessed 19 Jun. 2026.
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