When you’re borrowing money, whatever the reason may be, it is essential to read the fine print and comprehend everything you are signing up for. Many people end up in more trouble than they started in because they failed to take the time to understand what’s required of them.
It’s understandable, as many people find themselves in a situation where they need cash right away (learn more about getcashnow.net). To best protect yourself as a borrower, you want to ensure the lender you are working with adheres to the Federally mandated Truth in Lending Act (TILA). What is this law and how will it help you? Here’s what you need to know:
What is the Truth in Lending Act
The Truth in Lending Act was passed in the late 1960s to oversee borrowing situations between lenders and consumers. The law is intended to protect borrowers by mandating that lenders share key information regarding a loan before the borrower is contractually obligated to paying it. This means that while there may be small print, there is nothing explicitly hidden that could damage the borrower down the road. In a nutshell, it’s the difference between getting a loan from a recognized institution and signing up for a mob loan that you’ll regret for the rest of your life.
The Truth in Lending Act mandates that lenders must share the:
- annual percentage rate (APR);
- term of the loan; and
- total costs the borrower will incur.
The information must be shared in an upfront, noticeable way on documentation presented to the potential borrower before they sign anything. Depending on the loan and organization, they may also be required to have the information repeated on subsequent statements and correspondence to keep it fresh in the borrower’s mind.
So, regarding small print, if the information governed by the Truth in Lending Act is hard to see on a document, you could make an argument that the lender is not adhering to the law. Regardless, it’s important to be aware of your rights and use this knowledge when evaluating a potential lender.
Types of Loans Covered by TILA
The Truth in Lending Act covers both open-ended revolving credit and closed-end credit agreements. For example, your credit card would be an example of open-ended credit. Before receiving your card, you should have been presented with paperwork outlining all the information listed above. Closed-end credit would be something like an installment loan or mortgage. Essentially, it’s something you pay back by a certain date with a scheduled payment plan.
What TILA Doesn’t Cover
The Truth in Lending Act covers almost everything, but not quite. For example, interest rates charged by a lender as a part of their service offering are not regulated by TILA. Furthermore, beyond the basics of discriminatory practices, TILA does not dictate to whom a lender approves or declines for credit. As long as they can prove they aren’t breaking any laws surrounding discrimination, they may lend to whoever they wish.
Other Things to Know
In addition to being presented with information about the loan itself, you are also entitled to receiving a documented explanation of the type of loan you are getting and how it works. Lenders are legally not allowed to show you only one option that would best benefit them. While they may make a recommendation, they must also show you all loan options available that suit your needs.
The Truth in Lending Act also gives borrowers the right of rescission, meaning if you decide within three days that the loan was a mistake, you can back out of the contract without penalty. All of these rules are to help protect a consumer from predatory practices and give them room to correct their actions if they felt pressured into taking a loan.
Now that you know your rights as a borrower, you can move forward with your plans and take comfort in the fact that there are rules in place to keep you safe.