Interest Rate

Interest rate means the cost of borrowing money or the reward for saving money. In simple terms, it shows how much extra money a borrower pays to a lender over time. Interest rates affect loans, mortgages, credit cards, savings accounts, and business investment. When interest rates are high, borrowing usually becomes more expensive, so people and companies may spend less. For example, if you borrow $1,000 at a 5% annual interest rate, you would pay about $50 in interest for one year. Interest rate is not the same as inflation. Inflation measures how prices rise, while interest rates show the cost of borrowing or the return on saving money.