Definition
The percentage a lender charges you each year for borrowing money, or a bank pays you for keeping money on deposit.
What it means
An interest rate is the price of money. For a loan, it is the yearly percentage of the balance you pay the lender, not counting most fees; the APR adds certain fees to show the full yearly cost. Rates depend on the type of loan, its length, whether it is secured, your credit score, your down payment and market conditions. Many consumer rates follow benchmarks influenced by the Federal Reserve's policy rate and by Treasury yields; credit card rates often move with the prime rate. A fixed rate stays the same for the life of a loan, while a variable or adjustable rate can change. Small differences matter on large loans, so comparing written offers from several lenders on the same day is a common practice.
Example
On a $300,000 30-year mortgage, 6.0% means a principal-and-interest payment of about $1,799 a month; at 7.0% it is about $1,996, or about $71,000 more over 30 years.
Illustrative numbers only. Your situation will differ.