Finance
The Truth in Lending Act (TILA) requires lenders to disclose the 'Annual Percentage Rate' (APR). The APR differs from the interest rate because it:
AIs always higher than the interest rate since it includes fees and points✓ Correct
BIs always lower since it amortizes the loan over a longer period
CReflects only the interest charged without any fees
DIs set by the Federal Reserve and applied uniformly
Explanation
The APR includes the interest rate plus other financing costs such as points, origination fees, and certain closing costs spread over the loan term. This makes the APR higher than the stated interest rate (except for no-cost loans). TILA requires disclosure of the APR to allow borrowers to compare the true cost of financing from different lenders.
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