What does the term "finance charge" refer to?

The term "finance charge" encompasses all charges that are assessed as a condition for making a loan, which includes interest and other fees associated with the loan. This is a broad definition intended to capture not just the interest rate, but any additional costs that the borrower is required to pay in order to obtain credit. In the context of the Truth in Lending Act, it's essential for lenders to disclose the finance charge so that borrowers can understand the true cost of borrowing money.

By requiring all charges to be included under the finance charge, the regulation aims to promote transparency and make it easier for consumers to compare the costs of different credit options. This holistic view of the costs associated with a loan provides valuable insight into what a borrower will pay over the life of the loan, allowing for better informed financial decisions.