Finance Charge
The finance charge is the total dollar cost of borrowing, including all interest and fees you'll pay over the life of the loan. It's one of the federally required disclosures on every consumer loan agreement — found in the Truth in Lending Act (TILA) box. The finance charge tells you exactly what the loan costs in dollars, regardless of APR or term length.
The finance charge is the dollar version of APR. APR tells you the cost rate; the finance charge tells you the actual dollar cost over the entire loan term. Together they give you the full cost picture.
How it’s calculated
The finance charge equals the total of payments minus the amount financed. So a $1,000 loan that you repay in 12 payments of $94.56 has total payments of $1,134.71. Subtract the $1,000 amount financed and the finance charge is $134.71.
Why this number matters more than APR for some comparisons
When comparing loans with different terms, APR can mislead because it’s annualized. A 6-month loan at 50% APR has a smaller finance charge than a 36-month loan at 30% APR for the same principal. The longer loan has a lower APR but costs more in dollars.
Federal disclosure rules require both APR and finance charge to be shown so you can compare both ways. Use APR to compare same-term loans; use finance charge to compare loans with different terms.