Finance
The Truth in Lending Act (TILA) requires lenders to disclose the Annual Percentage Rate (APR). The APR differs from the stated interest rate because it:
AIs always lower than the stated rate
BIncludes the interest rate plus certain costs (points, origination fees) expressed as an annual rate✓ Correct
CIs set by the Federal Reserve
DOnly applies to adjustable-rate mortgages
Explanation
The APR reflects the true cost of borrowing by including the interest rate plus certain loan costs (points, origination fees, mortgage broker fees, etc.) expressed as an annual percentage rate. This allows borrowers to compare the true cost of different loan offers.
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