# Interest Rates

### **What Are Interest Rates?**

**Interest rates** represent the cost of borrowing assets or the yield earned by lenders who supply liquidity. Rates are typically **variable** and adjust dynamically based on market conditions, primarily driven by **Utilization** (the percentage of funds in the pool that have been borrowed).

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### **How Are Interest Rates Determined?**

1. **Utilization-Based Model**
   * When **Utilization is low**, borrowing demand is weak → interest rates are lower.
   * When **Utilization is high**, borrowing demand is strong → interest rates increase to encourage repayment and attract more deposits.
2. **Borrower Interest Rate**
   * This is the rate borrowers pay on borrowed assets.
   * The rate adjusts dynamically depending on the pool’s Utilization level.
3. **Lender (Deposit) Interest Rate**
   * This is the yield lenders earn by supplying assets.
   * It is derived from the borrowing interest rate, after accounting for the exchange/protocol’s fee (if applicable).

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### **Why Do Interest Rates Change?**

* **Market Supply & Demand:** More borrowing increases rates, while higher deposits reduce rates.
* **Liquidity Conditions:** High utilization raises rates to incentivize lenders to supply more liquidity.
* **Platform Risk Management:** Dynamic adjustments help maintain balance and protect against liquidity shortages.

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### How can I view the current lending rates?

1. Click **“Lend”** to enter the Lending page.
2. Open the **token selection dropdown menu**.
3. You will then be able to view the **real-time borrow and lend rates** for different tokens.

<figure><img src="https://1790800155-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2F3kiM6CAFBZoTCJcZ8X7k%2Fuploads%2FxN7g5Hi1tf3ybBos65AL%2Fimage.png?alt=media&#x26;token=7b54daa8-126e-43c0-a84e-9432376a3f1c" alt=""><figcaption></figcaption></figure>

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### **👉**[**Learn more about** Interest Rates](https://app.gitbook.com/s/ZRzI8k3y3P5zqjPLRxSx/borrow-and-lend/utilization-and-interest-rates)

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