---
title: "Finance charge: definition | Desert Rock Capital"
url: "https://www.desertrockcapital.com/glossary/finance-charge"
description: "A finance charge is the total cost of credit you pay to use a loan, stated as a dollar amount. It includes interest and certain required fees."
---

Loan costs

# Finance charge
All lending terms
Definition

A finance charge is the total cost of credit you pay to use a loan, stated as a dollar amount. It includes interest and certain required fees.

Under the United States Truth in Lending Act, the finance charge is the cost of consumer credit expressed in dollars, combining the interest along with certain required charges such as some origination fees or other prepaid finance charges. It is closely related to the annual percentage rate (APR): the APR expresses cost as a yearly percentage, while the finance charge expresses the same cost as a total dollar figure over the life of the loan. Lenders are required to disclose the finance charge to you before you commit. The finance charge does not include the principal being repaid, since that is the amount borrowed rather than the cost of borrowing it.

Source: [Truth in Lending Act (Regulation Z), 12 CFR §1026.4](https://www.law.cornell.edu/cfr/text/12/1026.4). This definition is general educational information, not legal or financial advice.
Related

- [APR](/glossary/apr)
- [Origination fee](/glossary/origination-fee)
- [Loan FAQs](/faqs)
- [Personal loans](/services/personal-loans)
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