True Interest Cost - TIC

Definition of 'True Interest Cost - TIC'


The real cost of taking out a loan. True interest cost includes all ancillary fees and costs, such as finance charges, possible late fees, discount points and prepaid interest, along with factors related to the time value of money.

It can also refer to the actual cost of issuing a bond.

Investopedia explains 'True Interest Cost - TIC'


The federal Truth in Lending Act requires lenders to disclose the true cost of credit to their borrowers and prospective borrowers in the consumer-loan agreement. This cost must be computed by a standard formula that incorporates interest, fees and other costs. This prevents lenders from making misleading statements about the real cost of borrowing from them.



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