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 lower than the stated interest rate
BIncludes certain loan costs in addition to the interest rate✓ Correct
CIs only calculated on an annual basis, not monthly
DReflects only the principal and interest payment
Explanation
The APR reflects the true cost of borrowing by incorporating the interest rate plus certain fees and costs (such as points and loan origination fees) spread over the life of the loan, making it higher than the stated interest rate.
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