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Personal loans and credit cards both allow you to borrow money and repay it over time, but they aren’t the same. A personal loan is a type of installment debt that typically has a fixed interest rate. Credit cards are revolving debt and usually have variable interest rates that can change over time.

Understanding the key differences between a personal loan vs. credit card debt is critical when you need to borrow. Your decision affects how much you can borrow, the amount of interest you pay, your monthly debt repayment budget, and your credit scores.

Read on to learn how personal loans and credit cards measure up, and what proposed credit card interest rate caps could mean for you.

What Is a Personal Loan?

A personal loan, also referred to as an installment loan, is a type of loan that lets you borrow a fixed sum of money and repay it over a set period. Personal loans may be secured, which means they’re tied to some type of collateral, but it’s more common for them to be unsecured.

Here are some key characteristics of personal loans:

•  Interest rates are most often fixed, which means you don’t have to worry about the rate changing during the loan term.

•  Fixed-rate personal loans make it easy to calculate your monthly payment for the entire loan term, as well as the amount of interest you’ll pay.

•  Traditional banks, credit unions, and online lenders can all offer personal loans, but there may be differences in loan amounts, interest rates, and fees.

•  Loan amounts can range from $500 to $100,000, depending on the lender.

•  A typical loan repayment term may be anywhere from 1 to 7 years.

Personal loans allow for flexibility, since you can use them for just about anything. For example, you could get a personal loan to consolidate credit card debt, make home improvements, pay for a wedding, or cover an emergency expense.

Your ability to qualify for a personal loan is most often based on your credit scores, income, and debt-to-income (DTI) ratio. Your DTI measures the percentage of your gross income that goes to debt repayment each month. The lender may also ask about the loan purpose, since some lenders have restrictions on things like using a loan to pay college tuition.

Recommended: What Is Debt Consolidation and How Does It Work?

What Is Credit Card Debt?

Credit card debt reflects the amount someone owes to one or more credit card companies. When you open a credit card account, you have a credit limit, which represents how much you can spend. As you charge purchases to the card, you create debt. Americans collectively owe $1.23 trillion in credit card debt, according to the Federal Reserve’s Household Debt and Credit Report for the third quarter of 2025.

Here are some key characteristics of credit card debt:

•  When you charge a purchase, your credit limit shrinks; when you make a payment to your balance, it increases.

•  The annual percentage rate (APR) measures the cost of carrying a balance on your card, including interest and fees, over one year. In terms of what is a good APR, lower is always better.

•  While it’s possible to find fixed-rate credit cards, rates are usually variable and are tied to a benchmark rate, like the Prime Rate.

•  If the benchmark rate increases, your credit card rate can go up.

•  Paying only the minimum amount due each month can make it difficult to chip away at your credit card debt.

The average credit card interest rate was 20.97%, as of November 2025, according to Federal Reserve data. High interest rates mean higher costs for borrowers who carry a balance.

In February 2025, Senator Bernie Sanders (D-VT) introduced the 10 Percent Credit Card Interest Rate Cap Act. The proposed legislation would temporarily cap credit card interest rates at 10% and impose penalties on creditors that violate rate cap restrictions. If passed, rate changes would sunset on January 1, 2031.

The bill did not move forward in 2025 and was largely opposed by the banking industry, which argued that it would limit opportunities to provide credit to consumers. In January 2026, President Trump expressed interest in implementing a 10% rate cap on credit card rates nationwide, to last for one year.

What would a 10% rate cap on credit card rates mean for you? Assume you have $10,000 in credit card debt that you want to pay off in 12 months. Here’s how the math compares with and without an interest rate cap.

At the time of writing, it’s unclear whether a rate cap will become a reality or how credit card companies would comply. But it’s a reminder of how impactful your APR can be when it comes to just how much credit card debt can cost you.

Recommended: What Is APR on a Credit Card?

What Is the Difference Between Personal Loan vs Credit Card Debt

A personal loan is a lump sum of money you get all at once and repay in fixed installments. Credit cards let you borrow, pay down the balance, and borrow again. Aside from that, the main differences between personal loan vs. credit card debt are how repayment is structured, how interest is calculated, and the impact to your credit.

Repayment:

•  Personal loans have a set repayment term. You make one payment each month on the due date established by your lender. Part of the payment goes toward the principal amount you borrowed, and part of it goes to the interest. Each payment reduces the balance you owe.

•  Credit cards require only a minimum payment. When you get your credit card statement each month you’ll see a minimum amount due you need to pay. Just paying the minimums could make it hard to reach your goal of becoming debt-free if you have a high APR, or you’re adding to what you owe with new purchases.

Interest Calculation:

•  Personal loans typically use a so-called “simple interest” formula to calculate what you owe in interest. A fixed-rate loan means you never have to guess about what you’ll pay.

•  Credit cards more often use a daily periodic rate. What you pay in interest depends on your APR, how much you pay monthly, and whether you continue adding to the balance.

Credit Impact:

•  Credit cards usually have a greater impact on credit scores than personal loans. That’s because the balance on a personal loan always goes down over time. That’s not necessarily the case with a credit card, which means your credit utilization — how much or your credit limit you’re using — can rise or fall from month to month. Those fluctuations in credit utilization, along with your payment history, directly impact your credit scores.

The key to how to use a credit card responsibly (or a loan) is to have a plan to repay what you borrow. Having a strategy and a budget that allows you to pay down debt at a steady pace can save you interest and stress in the long run.

Is It Better to Have a Personal Loan vs Credit Card Debt?

For credit scoring, it’s better to have both a personal loan and credit card debt, since it shows lenders that you can use different types of credit responsibly. When it comes to individual features, there are situations where you might prefer a personal loan vs. credit card debt, or vice versa.

You could get a personal loan to consolidate credit card debt. In that case, you use the loan proceeds to pay off your credit card balances, then make one payment to the loan until it’s paid off. Debt consolidation with a personal loan can make sense if your new rate is lower than the average APR across all the cards you plan to pay off.

Recommended: Cash-Back vs. Low Interest Credit Card: Key Differences

Pros and Cons of Personal Loans

Personal loans have advantages and disadvantages, just like any other type of debt. If you’re thinking of applying for a personal loan for any reason, it helps to weigh both sides.

Personal Loan Pros:

Pros and Cons of Credit Card Debt

Credit card debt can be manageable if you’re keeping track of purchases and paying more than the minimum due. There can be drawbacks, however, to using credit to cover expenses. Here are the main pros and cons to know.

Credit Card Pros:

Recommended: Guide to Lowering Your Credit Card Interest Rate (APR)

Example Scenarios for Personal Loans vs Credit Cards

How you use personal loans or credit cards can influence the kind of impact each one has on your financial situation. Let’s consider a few example scenarios.

•  You want to finish your basement and make it a usable living space, so you take out a $25,000 personal loan at 12.99%. Over a five-year term, you pay $9,122 in interest but the upgrade adds $17,000 in value to the home.

•  Your cat needs emergency surgery and you charge the $5,000 vet bill to a credit card that offers a 0% APR for 12 months. To clear the balance before the introductory rate ends, you’ll need to come up with $417 a month in your budget.

•  Your credit card debt has reached $20,000, and you’re worried about how much your 18% APR is costing you. You pay off the card with a five-year personal loan at 12%, saving yourself $4,000 in interest and trimming $55 per month off your monthly payment.

Using a personal loan calculator and credit card interest calculator can help you understand the true cost of borrowing with each financial tool. You can also explore ways to pay off your debt faster by increasing monthly payments, or learn how to lower credit card debt with a consolidation loan.

Recommended: 15/3 Credit Card Payment Method: What It Is & How It Works

The Takeaway

Credit cards can be attractive because they’re often easy to get, and you’re not locked into a set repayment term. Earning rewards on purchases or unlocking travel benefits is also appealing. But it’s important to consider what you’ll pay in interest if you carry a balance. A personal loan is still debt, but it may be less expensive to manage if you’re able to qualify for a low interest rate. Before you apply for any loan or credit card, it’s helpful to compare rates and fees, as well as what you can expect to pay monthly to make sure it fits your budget.

Credit cards have an average APR of 20%–25%, and your balance can sit for years with almost no principal reduction. Personal loan interest rates average 12%, with a guaranteed payoff date in 2 to 7 years. If you’re carrying a balance of $5,000 or more on a high-interest credit card, consider a SoFi Personal Loan instead. See your rate in minutes.

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FAQ

Which is better, a loan against a credit card or a personal loan?

Borrowing with a credit card may be preferable in emergency situations where you need to cover an expense quickly and don’t have time to wait for loan approval or funding. In terms of cost and predictability, personal loans beat credit cards on both counts when you get a low, fixed interest rate.

How much would a $5000 personal loan cost a month?

The amount you’d pay monthly toward a $5,000 personal loan depends on your loan term and interest rate. For example, say you get a 12-month loan at 10%. Your monthly payment would be $440 and you’d pay around $275 in interest total.

Is it better to take a loan or use a credit card?

It’s often better to get a personal loan if you’re able to qualify for a low interest rate. A low, fixed rate makes it easier to estimate your total cost of borrowing and plan for monthly payments in your budget. Credit cards have variable rates that can increase over time if the underlying benchmark rate changes.

How many Americans have $20,000 in credit card debt?

The exact number of Americans with $20,000 in credit card debt is difficult to pinpoint. According to one survey, 1 in 10 households have credit card balances totaling $20,000 or more. TransUnion’s November 2025 Credit Industry Snapshot put the average credit card balance per consumer at $6,555.

Do personal loans affect credit score?

Personal loans affect your credit scores in a few ways. A new hard inquiry can show up on your credit report when you apply for a loan, which can cost you a few points. Your payment history also counts, with on-time payments helping your score and late payments hurting them.

When is it better to have a personal loan over credit card debt?

It’s better to have personal loan debt vs. credit card debt if your loan has a low interest rate and the payments are manageable for your budget. You may also prefer a personal loan over a credit card if you’d like to know what your payment will be month to month.

Photo credit: iStock/PeopleImages

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SOPL-Q126-020

Finding the right financial aid can make all the difference when pursuing higher education. For Hawaiian students, there are numerous scholarships available for the 2026-27 academic year, specifically designed to support your educational journey.

Whether you’re seeking aid based on academic performance, financial need, or cultural background, these scholarships offer valuable opportunities. If you have a Native Hawaiian lineage, here are 15 prominent scholarships you may want to apply for.

Scholarships for Native Hawaiians

Scholarships are essentially free money from different organizations, groups, or institutions to be used toward your education. Since these are awards, the money doesn’t need to be paid back. They can help make affording college easier and may even eliminate the need to apply for federal or private student loans.

Below you’ll find some of the more commonly touted Native Hawaiian scholarship opportunities. However, this list is only partial, and you can find others through the Hawai‘i Community Foundation, the Office of Hawaiian Affairs, and by using SoFi’s scholarship search tool. You can also register for a chance to win a $2,500 SoFi Scholarship simply by entering your name and email address.

Here are the top 15 scholarships you can consider applying for if you are of Hawaiian ancestry:

1. Native Hawaiian Chamber of Commerce Scholarship

Sponsored by the Native Hawaiian Chamber of Commerce, this scholarship is geared toward students pursuing study in the area of business administration at an accredited two- or four-year college institution in Hawaii or the continental U.S.

Applicants for this must exhibit interests in the Hawaiian language, culture, and history, and have a commitment to contribute to the greater community.

2. Native Hawaiian Health Scholarship Program

The Native Hawaiian Health Scholarship Program (NHHSP) is a merit scholarship given to students seeking a degree in the field of healthcare. Some of the health professions include physician, nurse, dentist, clinical psychologist, dietitian or nutritionist, and social worker, among others. It’s important to note the eligible health professions may change each year.

Native Hawaiian students enrolled full-time at an accredited college or university in Hawaii can apply. Recipients who receive an NHHSP award are obligated to work full-time in medically underserved areas in Hawaii for a minimum of two years and a maximum of four.

Along with covering the student’s tuition and other education-related costs, the scholarship provides a monthly stipend for their full-time work requirement in their health care discipline.

3. Second Century Scholarship

The Second Century Scholarship is an award available to all Native Hawaiians attending any of the 10 campuses and educational centers within the University of Hawaii system. Since the scholarship is need-based, students who apply need to show they qualify for the requisite amount of financial aid.

Award amounts differ and are determined by the applicant’s financial need and the availability of funds. Native Hawaiian students can apply for financial aid through their campus financial aid offices. All regular financial aid deadlines apply.

4. Jean Ileialoha Beniamina Scholarship for Ni‘ihau Students Fund

A need-based scholarship, the Jean Ileialoha Beniamina Scholarship for Ni‘ihau Students Fund is for students who reside on either Kaua‘i or Ni‘ihau Island. Current Ni‘ihau residents or Kaua‘i residents who are one or two generations removed from Ni‘ihau Island are given preference, along with those students who are proficient or fluent in the Hawaiian language.

5. Blossom Kalama Evans Memorial Scholarship Fund

The Blossom Kalama Evans Memorial Scholarship Fund is sponsored by the Hawai‘i Community Foundation, which has over $7 million dollars a year available for scholarships from more than 300 funds.

College juniors, seniors, or those going on to grad school can apply. Applicants must be a resident of Hawaii and attend college in the state. Preference is given to those students who major in Native Hawaiian or Hawaiian studies.

6. Prince Kūhiō Hawaiian Civic Club Scholarship

The Prince Kūhiō Hawaiian Civic Club, an organization dedicated to the preservation and perpetuation of Hawaiian values, culture, and education, sponsors scholarships open to a variety of students pursuing degrees or certificates.

Preference for these awards are given to Hawaiian students that have engaged in community service or volunteer work, along with individuals pursuing degrees in the Hawaiian language, culture, studies, journalism, or education.

In addition, there is a vocational scholarship program for students who live in Hawaii. Applicants need to be enrolled at least part-time in a vocational degree program, including associate degrees, or a certification program on a list of their approved educational institutions and approved programs in Hawaii.

7. Warren Nakupuna Ah Loo Memorial Scholarship

This merit-based prize, named for the late civil servant Warren Nakupuna Ah Loo, is funded by the Nakupuna Foundation, a nonprofit committed to the advancement of the Native Hawaiian community.

Created for high school graduates or anticipated graduates from one of Hawaii’s Kamehameha Schools, the Warren Nakupuna Ah Loo Memorial Scholarship is designed to support students attending college anywhere in the U.S. who are pursuing studies in STEM (science, technology, engineering, or math).

Recommended: 30 College Scholarships for Minority Students

8. Rosemary & Nellie Ebrie Scholarship

This scholarship, also sponsored by the Hawai‘i Community Foundation, is for Native Hawaiians who were born and currently reside on the island of Hawai‘i, otherwise known as the Big Island.

Applications for the Rosemary & Nellie Ebrie Scholarship are open to undergraduate and graduate students who demonstrate financial need.

9. Asian & Pacific Islander American Scholarship Program

Asian & Pacific Islander American (APIA) Scholars offers a range of scholarships for students who identify as Asian, Native Hawaiian, or Pacific Islander. These awards are for undergraduate students who are already attending a U.S. accredited college or university, and range from $2,500 for one-year awards to $20,000 for multi-year awards.

APIA scholarships give special focus to those students who live at or below the poverty level and are first-generation college students. Applicants also must be a citizen, national, or legal permanent resident of the U.S.

Recommended: FAFSA Grants and Other Types of Financial Aid

How Do I Know if I’m Eligible for Native Hawaiian Scholarships?

The term Native Hawaiian refers to a person with origins in the aboriginal, indigenous people who settled in Hawaii, founded the Hawaiian nation, and exercised sovereignty over their territory. A Native Hawaiian person is also considered to be a Pacific Islander, which refers to those people from Polynesian, Micronesian, and Melanesian cultural backgrounds.

It’s important to note people who are born in Hawaii but don’t have any ancestral links aren’t considered to be Native Hawaiians.

Scholarships for Native Hawaiian Women

If you’re a Native Hawaiian woman, you have the opportunity to apply for scholarships specifically created to support your educational pursuits. These scholarships include:

1. Ida M. Pope Memorial Scholarship

Women of Hawaiian ancestry can apply for the Ida M. Pope Memorial Scholarship through the Hawai‘i Community Foundation. This scholarship is set up to benefit a female student pursuing a career in the field of health, education, or STEM. Applicants need to demonstrate financial need, be a resident of Hawaii, and enroll as a full-time student.

2. Ka‘ehu Scholarship Fund

Another women-only scholarship offered through Hawai‘i Community Foundation, the Ka‘ehu Scholarship Fund, is for female-identifying students working toward earning an undergraduate or graduate degree.

The need-based award gives preference to women of Hawaiian ancestry that identify as LGBT and have participated in community service, clubs, and/or high school athletics.

3. AAUW Honolulu Branch Education Funds

The American Association of University Women (AAUW) promotes equity and education for women and girls. The Honolulu branch of AAUW offers need-based scholarships for Hawaiian female undergraduate students who already have some college credits.

The AAUW Honolulu Undergraduate Scholarship is for women who have already completed some college (a minimum of 12 credits), but had to halt their education for certain life circumstances. For this reason, the application is open to those who are 21 or older.

Female students must already be accepted or enrolled as a full- or part-time undergraduate in a college, community college, university in Hawaii, or online program from a regionally accredited public or private not-for-profit educational institution. Applicants need to be a Hawaiian resident and demonstrate financial need.

AAUW Honolulu also has graduate scholarships that are offered and administered through the Hawai‘i Community Foundation.

4. The Betty Bell Scholarship for Kauai Women

Established in 2020, the Betty Bell Scholarship for Kauai Women benefits women from the island of Kauai who demonstrate a strong work ethic and may not normally have the opportunity to go to college.

The prize is named after Betty J. Bell, the first licensed pharmacist on the island of Kauai, who was a strong advocate for women, especially for those who wanted to achieve their career dreams. Her namesake scholarship prioritizes working mothers, as well as women who are returning learners who had started college but didn’t get to complete their degree.

The scholarship is administered through the Hawai‘i Community Foundation, and applicants must be a resident of Kauai Island and demonstrate financial need.

5. Ka’iulani Home for Girls Trust Scholarship

A need-based scholarship, the Ka’iulani Home for Girls Trust Scholarship supports female students of Hawaiian ancestry who are full-time college freshman or sophomores.

Women must be of Hawaiian ancestry, residents of Hawaii, and attend an accredited, two- or four-year, not-for-profit college or university within the Aloha state.

Recommended: 10 Popular Scholarships for Women

Can I Get a Scholarship for Being Hawaiian?

Yes, there are many scholarships for those who are of Hawaiian ancestry as well as for individuals who are Hawaiian born and residents of the state.

How Do I Get a Hawai’i Promise Scholarship?

If you are planning to attend one of the University of Hawaii’s seven community colleges, you can apply for a Hawai’i Promise Scholarship. This scholarship offers money from the state of Hawaii, along with the University of Hawaii, to provide qualified students with all of their direct education costs (tuition, books, fees) that aren’t met by other forms of financial aid.

In 2023, almost $3.8 million was awarded to 1,774 eligible students in the UH Community College system, with the average award per student equaling $2,142.

To qualify for a Hawai’i Promise Scholarship, you’ll need to be enrolled in at least 6 credits per semester at a UH Community College, be a resident of Hawaii, and complete the Free Application for Federal Student Aid (FAFSA). You’ll then be notified by your campus if you’re eligible for the scholarship.

Recommended: Important FAFSA Deadlines to Know

What Is Native Hawaiian Exemption Tuition?

Students who can show proof of their Native Hawaiian ancestry may be able to get a Native Hawaiian Tuition Waiver. Those who apply must have a financial need based on information given on the FAFSA form.

The waiver applies to part of your tuition (not fees) and you must be at least a part-time student (6 credits) and attending an institution within the University of Hawaii system.

Recommended: What Is Need-Based Financial Aid?

The Takeaway

There are a multitude of scholarship opportunities available for Native Hawaiians, aka people who are of Hawaiian ancestry. Scholarships for Native Hawaiians can be need- or merit-based and are open to undergraduate, graduate, vocational students, and community college attendees. Since competition for scholarships can be fierce, being able to apply for specific scholarships can give a Native Hawaiian student a major leg up when it comes to paying for college.

Other ways to pay for college include cash savings, grants, federal student loans, and private student loans.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

FAQ

If I was born and live in Hawaii, does that make me a Native Hawaaian?

Not necessarily. A Native Hawaiian is a person who is a descendant of one of the original Polynesian settlers in Hawaii. You can be a Native Hawaiian and not live in Hawaii, or even not have been born there, but you must have indigenous ancestry.

Do you have to live in Hawaii to be eligible for a scholarship?

It depends. Some Native Hawaiian-specific scholarships require the applicant to be a Hawaiian resident, but it’s not always a prerequisite.

How much does it cost to go to school in Hawaii?

The average cost for tuition and fees for a four-year college program is $7,723 for in-state students and $20,995 for out-of-state students. Tuition for private colleges or universities in Hawaii clocks in at $17,121.

Photo credit: iStock/davidf

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Please borrow responsibly. SoFi Private Student loans are not a substitute for federal loans, grants, and work-study programs. We encourage you to evaluate all your federal student aid options before you consider any private loans, including ours. Read our FAQs.

Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., Puerto Rico, U.S. Virgin Islands, or American Samoa, and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Not all repayment options may be available for all loans. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is current as of 3/2/2026 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org).

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SOISL-Q324-093

You may have noticed when shopping around for student loans that some lenders display an interest rate, while others show an APR. What’s the difference? The main distinction is that the student loan APR (which stands for annual percentage rate) includes any fees or other charges the lender may add to the loan principal. The “interest rate” does not.

When shopping for a student loan, it’s key to know whether you’re looking at an APR or an interest rate, since this can have a significant impact on the total cost of the loan. Read on to learn more about student loan APR vs. interest rate, what each number includes, and how to compare student loan rates accurately to find the best deal.

How Do Student Loan Interest Rates Work?

As with any loan, the interest rate represents the amount your lender is charging you to borrow money. It’s expressed as a percentage of your loan amount (or the loan principal) and doesn’t reflect any fees or other charges that might be connected to your loan. Interest rates can be fixed (the same for the life of the loan) or variable (may fluctuate over the life of the loan).

One of the factors that affect student loan interest rates is the type of student loan it is. Interest rates work differently depending on whether a student loan is federal or private. Congress sets the interest rates for federal student loans. The rate is fixed — and it’s the same for all borrowers. The federal student loan interest rate for undergraduates is 6.39% for new loans taken out for the 2025-26 school year, effective from July 1, 2025 to July 1, 2026.

The interest rate for private student loans works differently. Private lenders set their own rates, which may be higher or lower than rates for federal loans. Interest rates on private loans may be fixed or variable and typically depend on the creditworthiness of the borrower (or the student loan cosigner, if there is one). Those with higher credit scores generally qualify for lower rates, while borrowers with lower credit scores tend to get higher rates.

What Is the Student Loan APR, and How Is It Different From Interest Rate?

A loan’s annual percentage rate (APR) represents a more comprehensive view of what you’re being charged. It tells you the total cost of the loan per year, including any upfront fees, such as an origination fee, which a lender may charge for processing the loan. Because of that, a loan’s APR may be higher than its interest rate.

Looking at the APR helps you compare different loan offers and get a real picture of the overall cost you will pay for borrowing money for your education. If a loan doesn’t have any fees, the interest and the APR will be the same.

Federal student loans publish interest rates but not the APRs, so it’s important to keep in mind that the interest rate of a federal student loan is not the total cost of that loan. These loans also charge an origination fee, which is 1.057% for Direct Subsidized and Direct Unsubsidized loans, and 4.228% for Direct PLUS loans (unsubsidized loans for parents and graduate/professional students).

For private student loans, origination fees vary by lender. While some private lenders charge origination fees, it’s possible to find private loans that don’t have these fees.

However, it’s important to keep in mind that private student loans generally don’t come with the same protections as federal student loans, such as income-driven repayment plans and forgiveness programs.

What Fees / Charges Might Be Included in a Student Loan APR?

Fees that may be included in a student loan APR are upfront fees, such as origination fees. Other factors that could impact your loan balance — but are not included in the loan’s APR — are interest capitalization and late fees for missed payments.

Here’s how each of these things plays a role in student loans.

Origination Fees

The most common fee for student loans is the loan origination fee for processing the loan. Whether the loan is federal or private, this fee is typically based on a percentage of the total loan amount and will be deducted from your loan amount before the loan is dispersed. This means that if you borrow $10,000 and the origination fee is 1.057%, $105.70 will be deducted from your total loan amount — so you would actually receive $9,894.30 for the year.

While origination fees can be small, the cost can add up. Because these fees are deducted from the total loan amount, you are paying the fee with borrowed money and you’ll pay interest on the fee paid.

Capitalized Interest

Accruing interest and capitalized interest may affect the cost of your loan. Most student loans begin accruing interest daily as soon as they are disbursed. The exception is federal Direct Subsidized Loans, which the government covers the interest on until you are required to start making payments. That’s one of the major differences between subsidized vs. unsubsidized loans: For unsubsidized loans, the interest continues to accrue, increasing the amount the borrower will need to repay.

In addition, in certain situations, including deferment and during the six-month grace period after graduation, unpaid interest on your federal student loans may capitalize. That means the interest is added to your principal balance, and you’re charged interest on the new higher amount. Capitalization can increase the total balance of your loan.

Private lenders may have other or different situations when interest on student loans capitalizes, so it’s important to find this out when reviewing loan offers.

Late Payment or Returned Payment Fees

Both private and federal student loans may also have late fees and returned payment (or insufficient funds) fees, both of which add to the total amount you must repay. However, you can avoid these fees by always paying your bill on time and making sure you have enough money in your bank account to cover the payment.

Fees vary widely from one lender to the next, and some private lenders may not charge any fees.

Recommended: Average Student Loan Interest Rate

If a Loan’s Interest Rate and APR Are the Same, Does That Mean There Are No Hidden Fees?

Typically, if a student loan’s interest rate and APR are the same, it means there are no hidden fees. However, there are still a few things to watch out for that could affect the cost of your loan.

What to Look for in the Loan Agreement

Be sure to carefully read the loan agreement for your student loan. The agreement should spell out the loan’s interest rate and any upfront fees such as an origination fee.

Keep in mind that interest rates published for federal student loans are not APRs and do not include the origination fee. This fee will come out of the amount of money that is disbursed (paid out) to you while you’re in school.

The student loan APRs listed by private lenders include any additional upfront charges and fees. If the lender doesn’t charge any fees, the APR and interest rate will be the same.

Finally, check the loan agreement to see in what situations interest might capitalize and increase the overall cost of a loan.

Why Some Fees May Still Apply

A student loan may come with other fees, such as late fees for missed or late payments, and returned payment fees if a borrower doesn’t have enough money in their bank account to cover their loan payment. Other fees might include collection fees if a borrower defaults on a loan and the loan goes to collection.

When Shopping for a Loan, Should I Look at Interest Rate, APR, or Both?

As you’re shopping for a student loan, it’s important to look at the APR, if it’s available, as well as the interest rate, to get an accurate picture of what the loan will cost you.

Understanding the Full Cost of Borrowing

Because it includes interest and any fees, a loan’s APR tells the true cost of the loan, so that a borrower will know what the full cost of borrowing the money is. If you only look at the interest rate, you won’t be able to factor in any fees that the loan might come with.

Once you know what a loan will cost you in full, you can calculate student loan payments to determine what your monthly payments might be.

How to Compare Lenders Accurately

Whenever possible, you’ll want to look at the APR of a student loan, since this number allows a more apples-to-apples comparison of loan costs. The APR reflects both the loans interest rates and fees. If you just compare straight interest rates, you can miss the big picture in terms of the total cost of the loan. Sometimes those additional fees can make a big impact.

How APR and Interest Rates Affect Student Loan Repayment Over Time

A loan’s repayment amount — both the monthly payments and the total cost of the loan over time — are significantly impacted by a loan’s APR and interest rate.

Impact on Monthly Payments

A student loan’s interest rate and APR can affect student loan repayment over time in the following ways:

•   The percentage: A higher interest rate or APR means a higher monthly payment, and a lower rate means a lower payment.

•   How interest accrues: Although the interest rate is the same for federal Direct Subsidized and Direct Unsubsidized loans, the latter loan ends up costing significantly more because interest starts accruing from the time the funds are disbursed. With subsidized federal loans, the interest does not accrue while you are still in school.

For private student loans, interest typically begins to accrue as soon as the loan money is disbursed to your school. The longer interest accrues, the higher your monthly payments may be.

•   When interest capitalizes: In certain situations, unpaid interest on your student loans may capitalize and be added to your principal balance. That can increase monthly student loan payments as well as the overall cost of the loan.

Total Repayment Cost Over Loan Term

Your APR can determine the total cost of your loan over time. The higher the APY, the more interest that will accrue on the loan, and the more interest you’ll pay over time. That can lead to a higher overall cost of your loan over the term.

To reduce your payments, and potentially lower the total cost of your loan, one option some borrowers may want to consider is refinancing student loans. With student loan refinancing, you exchange your current loan for a new loan from a private lender with new rates and terms. Ideally, if you qualify, the interest rate on the new loan will be lower.

A student loan refinancing calculator can help you figure out how much refinancing might save you.

You can shop around for student loan refinancing rates to look for the best offer. Just be aware that refinancing federal student loans makes them ineligible for federal benefits like forgiveness, deferment, and income-driven repayment plans.

The Takeaway

A student loan’s interest rate is the cost of borrowing money and is expressed as a percentage of the loan amount. APR includes the interest rate as well as the additional costs and fees associated with borrowing. As a result, it gives you a more complete picture of the total cost of the loan.

Understanding APR vs. interest rate is important when you’re researching best rates for student loans. It will help you make informed decisions that may lower your cost of borrowing. Another option for potentially lowering your payments is through refinancing, if you qualify for a lower interest rate.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.

FAQ

What is a good APR for a student loan?

For new loans taken out for the 2025-26 school year, the federal student loan interest rate is 6.39% for undergraduates (whether the loan is unsubsidized or subsidized). For graduate students it’s 7.94%, and for parents it’s 8.94%. Average private student loan annual percentage rates (APRs) vary by lender. They range from 3.18% to 17.99%, as of January 2026, depending on a borrower’s credit.

Is APR better than interest rate?

The annual percentage rate (APR) gives you a more accurate picture of the true cost of financing. The APR of a loan tells you how much you will pay for a loan over the course of a year after accounting for the interest rate as well as any extra costs, like origination fees. When comparing loan offers, it’s generally better to compare APRs than interest rates, since this allows you to compare loan offers apples to apples.

Can APR and interest rate be the same?

Yes. If no fees are added to your loan amount, the interest rate and the annual percentage rate (APR) will typically be the same.

Why does APR matter when refinancing student loans?

APR gives you the total cost of borrowing, including any upfront fees you’ll incur when refinancing. It provides the true and total cost of borrowing, and it gives you a way to compare loan offers accurately.

How can I lower the APR on my student loans?

One option for lowering the APR on student loans is with student loan refinancing. When you refinance, you replace your existing student loans with a new loan that has new rates and terms. If your credit is strong, you may qualify for a lower interest rate, which would lower your APR.

If you have federal loans and you want to keep them because of the federal benefits they come with, enrolling in auto pay can give you a $0.25% discount on your loan’s interest rate.

About the author

Julia Califano

Julia Califano is an award-winning journalist who covers banking, small business, personal loans, student loans, and other money issues for SoFi. She has over 20 years of experience writing about personal finance and lifestyle topics. Read full bio.