What is a Truth-in-Lending Disclosure? When do I get to see it?
The federal Truth-in-Lending Act - or TILA for short requires that borrowers receive written disclosures about important terms of credit before they are legally bound to pay the loan.
These important terms include:
- Annual Percentage Rate: the APR is the cost of credit expressed as a yearly rate in a percentage;
- Finance Charge: cost of credit expressed as a dollar amount (this is the total amount of interest and certain fees you will pay over the life of the loan if you make every payment when due);
- Amount Financed: the dollar amount of credit provided to you (this is normally the amount you are borrowing);
- Total of Payments: the sum of all the payments that you will have made at the end of the loan (this includes repayment of the principal amount of the loan plus all of the finance charges)
The TILA disclosures will also include other important terms such as the number of payments, the monthly payment, late fees,, whether you can prepay your loan without a penalty, and other important terms.
Note that the TILA disclosure is often provided as part of the loan contract, so you may be given the entire contract for review when you ask for the TILA disclosure. You should review it all, paying special attention to the disclosures noted above. You should always insist on receiving and reviewing your TILA disclosure before you sign your loan contract.