Interest rate is the amount charged by the lender to the borrower in excess of the principal for the use of assets.
The interest rate also applies to the amount received from a bank or credit union from a deposit account.
Most mortgages use simple interest. However, some loans use compound interest, which is applied to the principal as well as accrued interest from previous periods.
A borrower who is considered a low-risk lender will have a lower interest rate. A loan that is considered high risk will carry a higher interest rate.
APY is the interest rate earned at a bank or credit union from a savings account or CD. Savings accounts and CDs use compound interest.