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What is a Truth-in-Lending disclosure for an auto loan?

The federal Truth-in-Lending Act (TILA) requires lenders and dealers to provide you with certain disclosures – before you sign your contract – that explain your auto loan’s costs and terms.

When you’re purchasing a car or vehicle, TILA requires that your lender or dealer provide you with specific disclosures. These include the interest rate on the loan and other important costs that will make up your total loan amount, what you’ll pay in finance charges and interest over the life of your loan, and the amount of your monthly payment.

Terms used in the Truth-in-Lending disclosure

  • Annual Percentage Rate (APR) – The APR is the total cost of credit, including the interest rate and mandatory fees, expressed as a yearly rate in a percentage. It is not the same as the interest rate and can be significantly higher with added fees.
  • Finance Charge – The total amount of interest and certain fees you will pay over the life of the loan if you make every payment when due.
  • Amount Financed – The amount you’re borrowing.
  • Total of Payments – The sum of all the payments that you will have made at the end of your loan term. This includes the projected cost of repaying the principal amount of the loan plus all of the finance or interest charges.

The TILA disclosures will also include other important information, such as the number of payments, late fees, whether you can prepay your loan without a penalty, and other important terms.

When you’ll receive your Truth-in-Lending disclosure

Your TILA disclosure is often provided with your loan contract. However, you should request it before you sign your contract so you can review it in detail and make sure you understand all of the information. You also want to make sure it aligns with the information and rates you’ve been given and that there are no hidden costs. TILA also requires that borrowers be provided with a fully filled in form and not a blank disclosure for consideration.

If you feel uncomfortable or pressured into signing, you can always walk away. If you experience any issues with receiving your Truth-in-Lending disclosures, you can submit a complaint with the CFPB.

Understand how to close the deal

Before you drive away from the dealership, make sure the paperwork matches the deal you think you’re getting and that you have received copies of all the final documents.

Read more about closing the deal