A basis point, often abbreviated as bp or bps, is a financial unit of measure equal to one one-hundredth of a percentage point, or 0.01%. It is commonly used to describe changes in interest rates, financial instruments, and other percentages in the finance industry. For example, an increase of 25 basis points on an interest rate translates to a change of 0.25%. This precision is particularly useful when discussing financial instruments where even small variances can represent significant monetary values. For instance, if a loan's interest rate increases from 2.00% to 2.50%, this is termed a change of 50 basis points. The term helps finance professionals communicate with greater precision and reduce potential ambiguities.