Texas Real Estate Brokerage Sales Apprentice Education (SAE) Practice Exam

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What does the Truth in Lending Act (TILA) primarily require lenders to provide to loan applicants?

Loan originator information
Estimates of total finance charges and the annual percentage rate (APR)
Interest rate comparison
Monthly payment schedules

The correct answer is: Estimates of total finance charges and the annual percentage rate (APR)

The Truth in Lending Act (TILA) is primarily concerned with promoting informed use of consumer credit by requiring disclosures about its terms and costs. A key aspect of this is that lenders must provide loan applicants with clear estimates of total finance charges and the annual percentage rate (APR). This requirement is crucial because it helps borrowers understand the true cost of borrowing and to make informed comparisons between different credit options. The total finance charges encompass various costs associated with obtaining the loan, while the APR represents the yearly interest rate, allowing applicants to grasp how much they will ultimately pay, including any additional costs associated with the loan. By mandating these disclosures, TILA aims to protect consumers from deceptive lending practices and ensure transparency, allowing them to make more informed financial decisions. Understanding these elements is fundamental to navigating the lending landscape, thus highlighting the importance of this requirement in the realm of consumer credit.