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When researching personal loans, you may see the terms APR (Annual Percentage Rate) and interest rate used interchangeably. However, they are not the same thing. The interest rate refers to the cost of borrowing money, expressed as a percentage of the principal amount, but it doesn’t include any other fees or charges.

APR, on the other hand, includes not only the interest rate but also other fees and charges you may incur when borrowing money. This makes the APR a more important number to look at that interest rate.

Read on for a closer look at APR vs interest rate, what it means when these two numbers are different, and what it means when they are the same.

What Is Interest?

Interest is the cost you pay for the privilege of taking out a loan — the money you’ll owe along with the principal, or the amount of money you’re borrowing.

Interest is expressed in a rate: a percentage that indicates what proportion of the principal you’ll pay on top of the principal itself. Interest may be simple — charged only against the principal balance — or compound — charged against both the principal balance and accrued interest itself. Typically, personal loan rates are an expression of simple interest.


💡 Quick Tip: Before choosing a personal loan, ask about the lender’s fees: origination, prepayment, late fees, etc. SoFi personal loans come with no-fee options, and no surprises.

Loan APR vs Interest Rate

So what’s the difference between an APR vs. an interest rate?

APR stands for Annual Percentage Rate and specifically designates how much you’ll spend, as a proportion of the principal, over the course of one year. Furthermore, the APR includes any additional charges on top of interest, such as origination or processing fees, which a straight interest rate does not.

In other words, APR is a specific type of interest rate expression — one that’s more inclusive of additional costs.

Why Is My Personal Loan APR Different Than the Interest Rate?

If your personal loan’s APR differs from its interest rate, that indicates that there are additional fees, such as origination fees, included in the total amount you’re being charged. If there were no fees, the APR and interest rate would be identical.

How Important Is APR vs Interest Rate?

A loan’s APR is generally more important than its interest rate because APR reflects the true cost of the loan — it accounts for interest as well as any fees tacked on by the lender. Looking at APR also allows you to compare two loan offers apples to apples. One loan may have a lower interest rate than another loan but if the lender tacks on high fees, then it may not actually be the better deal.

APR vs Interest Rate on Revolving Credit Accounts

Personal loans aren’t the only financial product that involve APR and interest rate. Revolving credit accounts — including credit cards — also have interest rates expressed as APR. However, with credit cards, these two rates are one and the same: APR is just the interest rate, and the terms can be used interchangeably.

Credit card issuers may charge other fees, e.g., cash advance fees, late fees, or balance transfer fees as applicable to individual usage. But it’s impossible to predict the type or amount of fees that might be charged to any one card holder.

Although these two expressions are the same, it’s important to understand that the interest rate on credit cards and other revolving credit accounts is usually compound interest, which is precisely why it can be so easy to spiral into credit card debt. When interest is charged on the interest you’ve already accrued, the total goes up quickly.

A single credit card account can have multiple APRs, depending on how the credit is used.

•   Purchase APR: the standard APR for general purchases.

•   Cash advance APR: the rate charged for cash advances made to the card holder.

•   Balance transfer APR: may begin as a low or zero promotional rate, but increase after the introductory period ends.

•   Penalty APR: may be charged if a payment is late by a predetermined number of days.

💡 Quick Tip: With average interest rates lower than credit cards, a personal loan for credit card debt can substantially decrease your monthly bills.

What Is a Good Interest Rate for a Personal Loan?

The interest rate on your personal loan — or any financial product — will vary based on a wide variety of factors, including your personal financial history (such as your credit score and income) as well as which lender you choose, how big the loan is, and whether or not it’s secured with collateral.

The average personal loan rate is currently about 12% APR. However, the rate you receive could be higher or lower, depending on your financial situation and the lender you choose.

Getting a Good APR on a Personal Loan

To get the best rate on your personal loan, there are some financial factors you can influence over time. Here are some action items to consider.

Improving Your Credit

It’s been said before, but it’s true: the higher your credit score, generally the better your chances are of achieving favorable loan terms and lower interest rates — not to mention qualifying for the loan at all. While there are loans out there for borrowers with bad credit and fair credit, improving your credit profile can make borrowing money more affordable.

Paying Down Your Debts

One way you may be able to improve your credit is to pay down your debts. And along with the opportunity to bolster your credit, paying down debt can also improve your chances of being approved for a loan because your debt-to-income ratio is one factor lenders look at when qualifying you for a loan. What’s more, paying down debt can make keeping up with your monthly loan payments a lot easier, since you’ll have more leeway in your budget.

Be Careful When Applying for Credit

Applying for too much credit at once can be a red flag for lenders and ding your credit score, so if you’re getting ready to apply for a personal loan, auto loan, or mortgage, try to limit how many times you’re having your credit score pulled. Typically, prequalifying for a loan involves a soft credit pull, which won’t impact your credit.

While credit scoring models do allow for rate shopping, it’s still a good idea to compare multiple lenders over a limited amount of time — a 14-day period is recommended — to find the lender that works best for your financial needs. If done in a short window of time, multiple hard credit pulls for the same type of loan will count as just one.

Recommended: Soft vs Hard Credit Inquiry

The Takeaway

Personal loans and other financial lending products come at a cost: interest. That’s the amount you’ll pay on top of repaying the principal balance itself. Interest is expressed in a percentage rate, most commonly APR, which includes both the interest and any other fees that can increase the cost of the loan.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.

FAQ

Why is my personal loan APR different than the interest rate?

If the annual percentage rate (APR) on your personal loan is different from the interest rate, it means the lender is charging additional fees, such as origination fees or others.

How important is APR vs interest rate?

The annual percentage rate (APR) is generally the more important figure to look at, since it includes additional costs incurred in getting the loan, such as fees. The APR will give you a more holistic picture of the price of the loan product.

What is a good APR and interest rate for a personal loan?

Personal loan interest rates vary widely but currently average around 12% APR. Depending on your personal financial history, the type and amount of the loan you’re borrowing, and your lender, the rate you receive could be higher or lower.

Photo credit: iStock/Charday Penn

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Learning how to read stock charts can feel similar to learning how to drive a car. It can be baffling at first, but once you learn the basics, including types of stock market charts, and the patterns they’re forecasting, you’ll hopefully get the hang of it.

With that in mind, learning how to read stock charts is a bit of a heavy lift, and can be difficult or intimidating for newer investors. Keep that in mind: It’ll take some time and practice before you feel comfortable! But the sooner you learn to decipher stock charts, the more useful that knowledge will be in your investment strategy.

The Art of Reading Stock Charts

Learning how to read stock charts can feel like you’re training in some sort of higher art. But again, with some practice, many investors can learn to do it and implement it into their investment strategy.

Understanding Chart Types

There are a handful of basic stock chart types, including line charts, bar charts, and candlestick charts. Thankfully, these charts are more or less exactly what they sound like.

For instance, line charts simply graph a financial security’s historical performance with a line, allowing investors to see the ups and downs over time. A candlestick chart, on the other hand, shows a stock’s high, low, opening, and closing prices for a specific time period. Bar charts also show a security’s price change over time, but there are some slight differences between bar charts and candlestick charts – often, bar charts aren’t color-coded, for example.

Decoding Stock Chart Data

Stock charts are relaying a lot of information about a stock’s performance over certain time periods. Taking that all into account can be difficult, but the main data points investors will want to try and utilize to guide their investment decisions involve prices, dates, and trading volume.

Before you proceed any further, though, you’ll want to make sure you know what stock symbols are.

Stock symbols, or tickers, are the series of letters, and sometimes numbers, by which a particular stock is uniquely identified. For example, the stock symbol for Apple is AAPL, and the stock symbol for Amazon is AMZN. Stock symbols are defined by the exchanges on which those stocks are traded — for instance, the New York Stock Exchange (NYSE) or the Nasdaq. These are the markets on which stocks and other assets are bought and sold. Stocks traded on the NYSE and Nasdaq can have tickers up to 5-letters long, but most are only 2-4.

With that in mind, using graphs and charts to figure out what’s happening in the stock market is the next step.
The first thing you’ll notice when looking at the chart itself is that it’s pretty much a line graph. Remember middle school math? You’re dealing with a basic X and Y axis—and the X axis refers to time.

On a stock line chart, the trend line is measuring the asset’s performance over that period of time. Investors might want to view the stock’s performance over a single day, week, or month, or see its long-run trend line over the past year or longer. It all depends on your personal trading goals.

Some stock charts may spell out the stock’s opening price, low price, high price, and closing price during a given time period, usually marked simply O, L, H, and C. Here’s what those figures each refer to:

•   The opening price is the first price at which the stock traded during the given time period.

•   The low price is the lowest price at which the stock sold during the given time period.

•   The high price is the highest price at which that stock sold during the given time period.

•   Finally, the closing price is the last price at which the stock sold before the exchange closed.

If the exchange is still open and the stock is being actively traded, the stock chart will likely display the last price, which is just what it sounds like: the last price at which the stock was successfully sold.

You might also see the change in that price from the one immediately before it, or last change, usually displayed as both a dollar value and a percentage.

For example, if you were looking at a chart for Company X (using a fictitious stock ticker, CMPNYX) stock, it might display the following string of letters and numbers:

CMPNYX 197.16 +0.05 (+0.04%)

In this example, CMPNYX is the ticker symbol, and $197.16 is the last recorded price of a single share sold on the exchange. That price was five cents higher than the trade immediately before it, meaning the value of the stock rose, in that time, by 0.04%.

By looking at how the trend line moves over the chart period, you can get a sense of the stock’s price and performance over time as well as its most recent statistics.

Volume corresponds to how many shares are bought and sold within a specific time period. In other words, it’s a measure of supply and demand. Volume is often represented as a series of bars running along the bottom axis of the chart. The bars’ size aligns with the number of trades made during that time period, and can be useful for guesstimating upcoming sales trends for that asset.

It’s not a perfect science, of course, but if a stock is trading at low volume — i.e., few shares are being bought and sold each day — it may indicate that the current price trend is about to change. Perhaps the stock is in poor demand because it’s valued too highly for the market. It could also just mean the investment is out of favor with investors.

On the other hand, a high trade volume might indicate that you’ll have an easier time selling the stock quickly if you’re considering short-term trading.

The Role of Technical Indicators

Investors and traders can use a variety of technical indicators to try and make sense of the market, too. That can include things like the 200-day moving average, which attempts to focus on overall pricing trends for a specific stock, or a variety of other trend and momentum indicators.

There are many technical indicators that investors can use to their advantage. It may be worth taking the time to learn more about each, and decide whether to fold them into your strategy.


💡 Quick Tip: How do you decide if a certain trading platform or app is right for you? Ideally, the investment platform you choose offers the features that you need for your investment goals or strategy, e.g., an easy-to-use interface, data analysis, educational tools.

Technical vs. Fundamental Analysis

We’ve discussed technical analysis, but fundamental analysis is another important element to introduce into the mix. Chart-reading, though, does rely heavily on technical analysis. For that reason, it may be worth revisiting some of the core reasons that investors will want to bone up on the subject.

The Case for Technical Analysis

Fundamental analysis focuses on a company’s underlying performance, whereas technical analysis is more focused on a stock’s performance. While there may be drawbacks to technical analysis, technical indicators are the type that will reveal patterns in stock charts that can be used to make investment decisions. While the buy or sell signals those patterns relay may or may not be faulty, those indicators are what investors are going to want to use when reading stock charts.

When Fundamentals Intersect with Charts

As mentioned, fundamental analysis concerns a company’s financial and operational health, more so than deciphering lines on a chart. Fundamental analysis involves looking at indicators such as earnings per share, price-to-earnings ratios, and return on equity, which can have an effect on how investors decide to buy, sell, or hold a stock. That, naturally, can dictate what a stock’s performance looks like on a chart – which is where it intersects with technical indicators, in many respects.

Essential Stock Chart Knowledge

When it comes down to it, investors may be best served by garnering essential stock chart knowledge involving the various styles of stock charts, their uses, and the language, or key terms, used to describe what those charts are displaying.

Stock Chart Styles and Their Uses

As mentioned, there are a few main types of stock charts: line charts, bar charts, and candlestick charts (there may be others, but we’ll stick with a few basic ones). Each shows the performance of a specific stock, albeit in different ways. Learning what those charts show, how they show it, and how to translate that information into action is ultimately what investors should aim to do when learning how to read stock charts.

Key Terms Every Trader Should Know

There are also a number of key terms that traders should know. The list can be lengthy, but should probably include words and phrases such as market capitalization (as discussed), price-to-earnings ratios, dividend yields, options, assets, and many more. You should become more familiar with them as you move through your investing journey – you’ll likely start using many of them yourself as your trading activity and strategies become more sophisticated, too.

Applying Your Stock Chart Skills

At the end of the day, learning how to read stock charts, for most investors, is all about one thing: applying that knowledge and making better-informed investing decisions.

How to Use Charts for Smarter Investing

There’s really no limit to the way that investors or traders can use charts to make smarter decisions. The more time you spend studying charts and learning what they show or say, the more information you’ll end up having at your disposal with which to make a decision. The issue, of course, is that all of that information still can’t tell you in all certainty what a stock’s value is going to do next.

That’s perhaps the most important thing to remember about stock charts: they are not a crystal ball, and there’s no guarantee that investors will achieve the outcomes they were hoping or planning for.

Can Charts Enhance Your Investment Strategy?

Stock charts can enhance your investment strategy by adding a whole new dimension – and pile of data and information about specific stocks – to your tool kit. But again, you can spend hours looking at charts, and that still doesn’t mean that a position or investment won’t blow up in your face. You may think of it this way – all investing involves a level of risk, but learning to use stock charts as a part of your strategy may help you gauge how big those risks are, and in some cases, avoid particularly risky investments.

Invest in what matters most to you with SoFi Active Invest. In a self-directed account provided by SoFi Securities, you can trade stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, options, and more — all while paying $0 commission on every trade. Other fees may apply. Whether you want to trade after-hours or manage your portfolio using real-time stock insights and analyst ratings, you can invest your way in SoFi's easy-to-use mobile app.