Borrow APR is the interest you pay on a loan from a lending service in DeFiDeFi (decentralised finance)Financial services, such as lending, saving and trading, that run on smart contracts on a blockchain instead of through a bank or other middleman., such as Aave. It is usually variable and can change every time someone borrows or repays. The interest is added to your debt continuously, so the debt keeps growing until you repay the loan.
What sets the rate?
The rate depends on the utilisation rateUtilisation rateThe share of the money in a lending pool that is lent out. A high utilisation rate pushes rates up and can delay withdrawals., meaning how much of the money in the pool is lent out. When little is borrowed, rates are low, which encourages borrowing. When most of the money is lent out, rates rise. That attracts new deposits and encourages borrowers to repay.
On Aave, rates rise gently up to a set utilisation rate and much faster above it. The interest borrowers pay goes mostly to the people who supplied the money, as supply APYSupply APYThe return you earn for depositing crypto in a DeFi lending service. It comes from the interest borrowers pay and it varies..
APR and APY
APR (annual percentage rate) is the yearly rate without compounding, while APY (annual percentage yield) includes compounding and is therefore a slightly higher number for the same rate. Not every service shows the same figure, so it is worth checking which one you are looking at.
What to keep in mind
Variable rates can rise sharply in a short time, for example when many people want to borrow the same crypto. A larger debt lowers the loan's health factorHealth factorA number that shows how well the collateral covers a DeFi loan. If it falls below 1, part of the collateral can be sold to repay the debt. and brings it closer to liquidation. The loan has to be repaid with interest, whatever happens to the price of the crypto you put up as collateral.
Everything in Myntkaup Learn is written and regularly reviewed by the Myntkaup editorial team. It is for education and is not investment advice. Editorial policy. Updated 18 October 2026.