Prorate Definition

Prorate, or pro rata, means "in proportion to" and is commonly used in finances to mean some amount adjusted for an incomplete time period. For example, on a new apartment rental the incomplete first month’s rent may be prorated downward to compensate the new renter for days of the month that have already passed.

In banking, the term usually refers to an alteration of the interest rate for a period less than the specified period; for example, an annual percentage rate will be prorated for use in a monthly billing cycle. Note that in specific uses the term will probably be rigorously defined, and its use in legal documents usually is in reference to some legal definition which will vary with jurisdiction.