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How to Calculate Finance Charge.
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How to Calculate Finance Charge.

Rosemary Njeri

A finance charge is the cost of borrowing money, including interest and other fees.

Finance charges can come in several forms, but the most common are:

  • Late fees if you fall behind on your payment.
  • Membership fees.
  • Interest
  • Any applicable service fees etc.

Formula to calculate finance charge.

There is no set formula for how lenders can assess a finance charge since it can be a lump sum or based on a percentage of the loan.

Example:

Suppose your loan payment for the month is overdue, calculate your finance charge if the late fees is $ 2, your interest is $ 10.

= 2 + 10

= 12

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