Amount Financed


DEFINITION of 'Amount Financed'

The actual amount of credit made available to a borrower in a loan, as defined by Regulation Z disclosure requirements of the Truth In Lending Act. Specifically, it is the amount of the loan principal, less prepaid finance charges (loan origination fees, so-called points, adjusted interest, etc.) and any required deposit balance. The amount financed is used to calculate the annual percentage rate.

BREAKING DOWN 'Amount Financed'

The purpose of the Truth In Lending Act, passed in 1968, is to standardize the disclosures made to borrowers concerning the terms of a loan, most notably in the way costs are calculated. The Act prescribes that a Truth In Lending Disclosure Statement - which includes the amount financed - be provided to the consumer within three days of applying for a loan. The Statement enables borrowers to compare the costs of loans among different lenders.

  1. Prepaid Finance Charge

    Charges on a loan agreement which are not included as part of ...
  2. Regulation Z

    A specific Federal Reserve Board regulation that requires debt ...
  3. Truth In Lending Act - TILA

    A federal law enacted in 1968 with the intention of protecting ...
  4. Loan

    The act of giving money, property or other material goods to ...
  5. Annual Percentage Rate - APR

    The annual rate that is charged for borrowing (or made by investing), ...
  6. Disclosure Statement

    1. A document explaining the rules of an IRA in plain, nontechnical ...
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  3. What is the difference between "closed end credit" and a "line of credit?"

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  4. In what instances does a business use closed end credit?

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