Interest Rate

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Interest is the general term for the cost of borrowing money, and the exact cost is called the interest rate - sometimes referred to as the rate of interest. It's usually shown as a percentage on a per annum basis. Short-term interest rates refer to the cost of borrowing money for loan periods of shorter durations. For example, interest rates charged by credit cards companies are short-term as they are essentially lending money on a monthto-month basis to cardholders with unpaid balances due. The interest rates on car loans are typically seen as short-term even though the loan period might be several years. Long-term interest rates refer to rates charged for much longer loan periods, such as a loan for a thirty-year fixed rate mortgage. The interest rates payable on federal government treasury bonds of ten years and longer ( government securities) are also long-term rates. See also Annual Percentage Rate, Compound Interest, Federal Funds Rate, Prime, and Simple Interest.