When a bank lends money they charge a fee called the simple interest. The interest is based on a ratio of the loan. This percentage indicates the amount of money that should be paid to the bank each year. If the interest rate is on a dollar loan, it costs each year until the loan is paid. There is a difference in interest rate and interest cost. The interest rate is the percentage of the loan that should be paid, in this case, Unlike the interest cost, that is the actual sum that has to be paid in interest each year, for this loan it's USD.