What does the term "total of payments" refer to?

The term "total of payments" refers specifically to the total sum of all payments made by the borrower throughout the life of the loan. This figure encompasses all scheduled payments, which includes both the principal amount borrowed and the interest charged on that amount over the repayment period.

When a borrower takes out a loan, they agree to repay the loan amount along with interest under specified terms. The "total of payments" gives the borrower a clear view of how much they will ultimately pay back to the lender, providing essential transparency about the financial commitment they are undertaking. This term is crucial for borrowers to understand as it helps them assess the true cost of financing and aids in comparing different loan products.

The other choices focus on components of borrowing but do not encapsulate the comprehensive nature of total payments as defined by Regulation Z. For example, the total sum of interest is only one part of the overall "total of payments," and the amount funded by the lender does not include the payments made by the borrower. Similarly, total fees associated with loan closure are separate costs and do not represent the total repayment amount. Understanding "total of payments" provides key insights into the overall financial obligation resulting from a loan.