Interest rate
GeneralThe percentage a lender charges you to borrow money, or the percentage a bank pays you for keeping money in a savings account. Lower rates are better for borrowing; higher rates are better for saving.
Related terms
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APR (Annual Percentage Rate)
The yearly cost of borrowing money, expressed as a percentage. APR includes interest and certain fees, making it a more complete picture of what a loan actually costs compared to the interest rate alone.
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Fixed rate
An interest rate that stays the same for the entire term of the loan or mortgage. Fixed rates provide certainty — your payment amount will not change — but may start higher than variable rates.
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Variable rate
An interest rate that changes with the market, usually tied to the Bank of Canada prime rate. Variable rates may start lower than fixed rates but can increase, making payments less predictable.
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Compound interest
Interest calculated on both the original amount and the interest already earned. Over time, compounding causes savings to grow faster and debts to grow larger. Starting early makes a significant difference because of this effect.