Is it legal to roll the finance charge into the loan amount and then charge 21% APR on top of that?

-- Marlon Williams (marlon_dd@email.com), January 19, 2001

Answers

I'm not an attorney and your question starts with, "is it legal..".

But, I am a lender. Your question suggests that the 21% APR is the interest rate. APR, by definition is a calculation based on all the charges, a little like the sum of all the charges. All the finance charges and the interest rate are included in the APR figure.

If your lender is quoting 21% APR and finance charges, then your interest rate (your note rate) is under 21%.

Did your lender provide you with a Truth in Lending Statement? If so, the answers are all contained within that document (if prepared properly).

To respond to the two parts of your question individually (remembering that I am not a lawyer), it is usually legal to roll the finance charges into the loan amount, depending on the type of transaction and the state you live in and the state you are borrowing in. Based on your interest rate, it appears you have a credit card issue.

There should not be any charge that is not included in the APR. That means, you may have a finance charge that you can either finance or pay in cash, plus your interest rate on your note, all of which are calculated in the APR.

APR is a complex issue and most people don't understand it. It was created by Congress to aid borrowers in shopping for and comparing loans by various lenders. Instead, it mostly confuses borrowers, but it is a great tool for those that understand it.

-- Everett Ives (Everett_ives@yahoo.com), June 07, 2001.