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
