The Truth in Lending Act is a federal law designed to help consumers compare the terms of various lenders. There are many ways to calculate interest and various fees which may be charged, all of which affect the total cost of your loan. Truth in Lending helps to standardize some of these factors so the applicant can accurately weigh the cost of borrowing against paying cash. According to the Act, a creditor must provide the follow information when offering an installment contract: the amount being financed, payment due dates and the minimum monthly payment required, the total number of monthly payments to be made, the annual percentage rate, and the total finance charges. Lenders must disclose payment terms, including balloon payments and late fees if those apply; any points, application fees, annual fees, and other charges; and any penalties for pre-payment. If the loan features a variable rate, the lender must show the highest rate it would charge, how the rate is calculated, and the resulting monthly payment. Typically, the lender may not charge you a fee until furnishing this information. Truth in Lending also controls the way credit offers may be advertised and gives you rights to cancel certain real estate loans within three days.
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