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An interest rate is the percentage of borrowed money a lender charges a borrower in a specified time period.
Interest rates are typically quoted in annual terms. If you borrow $100,00 at a 5% (simple) interest rate you’ll need to pay $5,000 of interest per year for the life of the loan. Lenders charge higher interest rates for higher risk loans, e.g. to a borrower who has a lower probability of being able to pay the loan.
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