What "interest rate" means in finance

An interest rate is the percentage of the principal amount that a lender charges a borrower for the use of money or credit. It is commonly expressed as an annual percentage rate (APR) and can be either fixed or variable depending on the terms of the loan or financial instrument. Interest rates can be influenced by a variety of factors including inflation, economic conditions, government policies, and the creditworthiness of the borrower. They are a key tool used by central banks to control the supply and demand of money in an economy.