Definition of Interest rate:
The annualized cost of credit or debt-capital computed as the percentage ratio of interest to the principal.
Each bank can determine its own interest rate on loans but, in practice, local rates are about the same from bank to bank. In general, interest rates rise in times of inflation, greater demand for credit, tight money supply, or due to higher reserve requirements for banks. A rise in interest rates for any reason tends to dampen business activity (because credit becomes more expensive) and the stock market (because investors can get better returns from bank deposits or newly issued bonds than from buying shares).
The proportion of a loan that is charged as interest to the borrower, typically expressed as an annual percentage of the loan outstanding.
How to use Interest rate in a sentence?
- The interest rate of the loan was so high that the young couple was unable to afford buying a new house of their dreams.
- Credit cards have an interest rate that works against the user while savings accounts have an interest rate that works for the user.
- Reduced interest rates encourage people to spend money on home improvements.
- A young couple just graduated from the University with honors. They are both deep in debt from college loans. They both have jobs and need a car. The cost of the interest rate between them is a high fee. It is a struggle to save money when the cost of living is high.
Meaning of Interest rate & Interest rate Definition