> For the complete documentation index, see [llms.txt](https://docs.suilend.fi/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.suilend.fi/faq/what-is-the-difference-between-apr-and-apy.md).

# What is the difference between APR and APY?

If you’re new to DeFi, you’ve probably seen terms like **APR** and **APY** when looking at lending, borrowing or staking rates. They both tell you how much you can earn (or owe) over a year, but they work a little differently.

<figure><img src="/files/R2YajESjsz1y0RA4h0BZ" alt=""><figcaption><p>Deposit and Borrow APRs in Suilend. </p></figcaption></figure>

## APR (Annual Percentage Rate)

* APR is the simple interest you earn or pay in a year.
* It doesn’t include compounding, which means it only counts the interest on your original deposit.

**For example**: If you deposit $1,000 at 10% APR, you’ll earn $100 over the year. That’s it - no extra interest on top of the $100.

## APY (Annual Percentage Yield)

* APY includes compounding - which means it also counts the interest you earn on your interest.
* It assumes you keep reinvesting whatever you earn.

**For example**: If you deposit $1,000 at a 10% APY, you’ll earn a bit more than $100 by the end of the year, because each time you earn interest, that amount also starts earning interest.

## Why We Show APR Instead of APY

On Suilend, interest is paid out per second, and users decide when to claim or reinvest it. Showing APR:

* Keeps things simple and clear
* Helps you compare rates easily across different platforms
* Avoids giving a misleading number (since not everyone compounds)

## What determines borrowing and supply APRs?

The supply and borrow APRs on Suilend are determined algorithmically based on utilization - the ratio of borrowed assets to total supplied assets in a lending pool. As a supplier, your interest is directly tied to how much demand there is to borrow the asset you’ve deposited, using the formula:

> Supply APR = Borrow APR × Utilization × (1 - Interest Rate Spread)

### Borrow APRs (for borrowers)

* As more of an asset is borrowed (higher utilization), the borrow rate increases.
* This encourages supply and discourages excessive borrowing.

### Supply APRs (for depositors)

* The more that’s borrowed, the higher the utilization, and the more suppliers earn.
* Interest Rate Spread is an amount of interest set aside for the protocol, 20% in Suilend's case.&#x20;