Truth in Lending Disclosure Statement (TIL)

Printable version of the Truth in Lending Disclosure Statement

The Truth In Lending Disclosure Statement is neither a contract nor a commitment to lend.

Your loan officer or mortgage broker is required to provide you with the Truth in Lending Disclosure Statement within three business days of the date that you apply for your loan.

The purpose of the Truth in Lending Disclosure Statement is to show you the estimated total costs of borrowing, the expected payment amounts over the life of the loan, and other significant features of your loan.

Now let's look at the different sections of the Truth in Lending Disclosure Statement.

The Annual Percentage Rate or APR is the cost of your loan expressed as a yearly rate.

ANNUAL PERCENTAGE RATE The cost of your credit as a yearly rate %

The Finance Charge is the dollar amount the loan will cost you.

FINANCE CHARGE The dollar amount the credit will cost you $

The Amount Financed is the amount of credit provided to you or on your behalf.

AMOUNT FINANCED The amount of credit provided to you or on your behalf $

The Total of Payments is the amount you will have paid after making all payments as scheduled.

TOTAL OF PAYMENTS The amount you will have paid after making all payments as scheduled $

The purpose of an APR is to allow you to quickly compare the total costs between competing loans without having to analyze all of the individual costs within each loan.

For example:

• A $100,000 30-year fix rate loan @ 7% interest rate with finance costs of $5,000 = an APR of 7.52%.
• While the same loan @ 8% interest rate with finance costs of $4,000 = an APR of 8.44%.

By comparing the APR’s (7.52% and 8.44%.) alone, we can see from our example that the first loan (7.52% ) initially seems to have a higher cost. However, because the interest rate is lower, it will provide a lower total cost to you in the long run. Comparing APR's on loans is a quick way to get a feel for which loan is the better deal.

The second major section shows you the monthly payments you will make over the life of the loan.

Truth in lending disclosure statements vary from lender to lender. Toward the bottom, there are several categories of services on your statement. Again, these vary from lender to lender. Be sure to ask about the sections that are checked before you sign.

For example:

• Pre-Payment Penalty is a penalty that you may have to pay if you pay the loan off early. Not knowing you have a Pre-Payment Penalty can be a very costly oversight later on.
• Balloon Payments are a lump sum payment due at a specific point in the loan. A balloon payment may be for the entire balance you owe.

TIP:	By Law, the lender must disclose this information to you upfront on this disclosure form.

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