What is the Truth in Lending Act?
The Truth in Lending Act (TILA) is a law created by the United States government in 1968. The purpose of the TILA is to protect borrowers by making them aware of the terms of a loan before they accept it.
This law helps protect consumers by requiring lenders of all kinds, including banks, credit unions, and other financial institutions, to make potential borrowers aware of the specific terms of a loan, in writing, before the borrower can accept it. This list of conditions is known as a “Truth in Lending disclosure,” and it is kept on file by your lender.
To ensure you are getting the best terms for your situation, you should request a copy of your disclosure and read it thoroughly before signing for any loan. Keep your copy in a safe place and refer to it if you have any questions about your contract.
If you would like more specific information about the Truth in Lending Act, you can read it here.
Why is the Truth in Lending Act important?
The Truth in Lending Act looks after borrowers both before and after a loan contract is signed. Before this act was created there was little regulation over personal loans. The TILA now ensures each borrower clearly understands their loan’s terms before accepting it.
The TILA also protects borrowers by allowing them to see critical parts of the loan, including how much the loan will cost. This information means each potential borrower can shop around and find the best loan for their situation.
How does the Truth in Lending Act protect me?
The Truth in Lending Act was established to protect borrowers and help them make informed decisions. The act requires lenders to offer a range of details about each loan they offer. These details need to be presented in a way that is easy-to-read and plainly visible to the potential borrower.
The Truth in Lending Act also requires that lenders extend offers of each viable loan option to borrowers, allowing the consumer to choose the best loan for their situation.
For closed-ended loans, the lender must provide the borrower with the following information:
- Annual percentage rate (APR)
- The date when the loan will be paid back
- Late fees
- Number of payments until the loan is repaid
- The amount of a typical monthly payment
- Any penalties for paying back your loan early