An interest rate is the percentage charged by a lender for borrowing money, typically expressed as an annual percentage rate (APR). It’s a key cost in financial transactions such as loans, mortgages, credit cards, and savings accounts. The rate affects the total interest paid on the principal amount borrowed—higher rates increase borrowing costs, while lower rates decrease them. Factors that influence your interest rate include the loan type, your creditworthiness, market conditions, and loan duration. Central banks also play a role by adjusting policy rates to influence economic and monetary conditions.