Finance
The Truth in Lending Act (TILA) requires lenders to disclose the Annual Percentage Rate (APR) to borrowers. The APR differs from the interest rate because it:
AIs always lower than the stated interest rate
BIncludes certain fees and costs of the loan expressed as a yearly rate✓ Correct
CReflects only the principal and interest payment
DIs set by the Federal Reserve
Explanation
The APR includes the interest rate plus certain loan fees and costs (points, origination fees, PMI) expressed as an annual rate. This allows consumers to compare the true cost of different loan offers.
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