Interest rate: a world behind a percentage

Reading time 1 minute

Published on 16/02/2026

'Time is money' is more than just a saying. Every time we borrow money or lend it, such as when we invest in a government security or another type of bond, the interest rate comes into play.

In simple terms, the interest rate is the price of money over time:

• when we take out a loan, it represents the cost we are willing to pay to use today money we do not yet have;
• when we lend money, it is the return we ask for giving up the possibility of spending our money today.

It is expressed as a percentage of the amount borrowed or lent for one year and depends on several factors, such as economic conditions, time, risk and inflation. For example, if borrowing or lending €100 costs €5, the interest rate will be 5 per cent (5/100).

Understanding interest rates helps us make better informed decisions when we want to take on debt or invest our savings, and it also helps us understand how the economy works.

To find out more, read the new page 'What is the interest rate?' in our series 'Made easy'.