The rate of return that a lender earns on loaned money, expressed as a percentage of the loaned money (or principal amount). Lenders may be banks (which extend loans to clients, both individual and institutional), investors (who lend money to debt issuers, such as private entities, government agencies, etc.) and so on. Interest rate may be fixed or variable, depending on the underlying arrangement (or instrument) of lending.

Broadly speaking, interest rate is the rate of return that reflects the relationship between an instrument’s, security’s, product’s, investment’s cash flows that arise at different points in time over the course of its term or life (or time to maturity, etc.)

It also expresses the required compensation from “temporarily” giving up the right of using a specific amount of money to place it at the disposal of, and to the benefit of, another party for a specific period of time.