A finance charge is the total fee incurred by a borrower to access and use debt. The charge compensates the lender for providing funds to a borrower. In essence, it is the cost to borrow money. The total finance charge includes the following:
The amount of finance charges is closely related to the creditworthiness of the borrower. Thus, a stable business with predictable cash flows and a conservative financial structure will incur lower finance charges.
The government requires that finance charges be disclosed in lending documents issued to borrowers.