# what is a finance charge on a loan

A finance charge is simply theinterest you would pay on the loan IF you made the required minimum,payments on the loan for the entire term of the loan. The finance charge does not take into account any prepayments you make during the time you have the loan.

• ### What is a finance charge?

• A Simple Definition? A finance charge is simply the interest you would pay on the loan IF you made the required minimum, payments on the loan for the entire term of the loan. The finance charge does not take into account any prepayments you make during the time you have the loan.

• ### Are finance charges and interest charges the same thing?

• That鈥檚 very astute of you to recognize that finance charges aren鈥檛 necessarily the same as interest charges. Car loans have finance charges, which are best described as the cost of borrowing money to pay for a car. This includes both interest and the fees associated with borrowing, such as origination fees, clerical fees, and other fees.

• ### What are the finance charges for an auto loan?

• Mortgages are subject to the following finance charges: The leftover amount is subject to interest charges each month. Auto loans can be used to purchase new or used vehicles, as the name suggests. There is an annual fee for borrowing money at once, and you pay it back. These are the charges that you will encounter when taking out an auto loan.

• ### How do I calculate the finance charge on a loan?

• 1 Take your required monthly payment and multiply it by the number of months of your loan. This is the total cost of your loan. … 2 Then take the amount you borrowed initially. Let鈥檚 say it is \$20,000. 3 The finance charge is equal to the total cost of your loan minus the amount you initially borrowed. In this example: \$23,000-\$20,000=\$3,000.