---
title: "Finance charge: definition | Desert Rock Capital"
url: "https://www.desertrockcapital.com/glossary/finance-charge"
description: "Under the Truth in Lending Act (Regulation Z), the finance charge is 'the cost of consumer credit as a dollar amount."
---

Loan costs

# Finance charge
All lending terms
Definition

Under the Truth in Lending Act (Regulation Z), the finance charge is "the cost of consumer credit as a dollar amount. It includes any charge payable directly or indirectly by the consumer and imposed directly or indirectly by the creditor as an incident to or a condition of the extension of credit. It does not include any charge of a type payable in a comparable cash transaction."

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(a)](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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