Interest rates are the cost of borrowing money or the return on investment for saving money, expressed as a percentage of the principal amount. In the context of loans, the interest rate is the amount charged by lenders to borrowers, typically calculated annually.
For borrowers, a higher interest rate means paying more over the life of the loan. For savers, a higher interest rate means earning more on deposits in savings accounts or other investments.
Interest rates can be fixed (unchanging over time) or variable (fluctuating based on market conditions). They are influenced by various factors, including the central bank's policies, inflation, and overall economic conditions.