The nominal interest rate is the percentage increase in money that the borrower pays to the lender for the use of the lender's money over a specified period, typically one year. It does not take into account changes in price levels, meaning it does not reflect the purchasing power of the interest payments. For example, if you have a nominal interest rate of 5%, it means that you will pay 5% more over the course of the loan, irrespective of inflation. Investors and economists often compare nominal interest rates with real interest rates, which adjust for inflation to reflect true growth in purchasing power.