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**