Definition
Amount Financed
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Amount financed is a term that describes the actual loan amount that is usable by the borrower after deducting finance charges.
These “finance” charges are sometimes called another name like administrative charges, processing fees, disbursement fees, etc.
This is a term that has little material meaning. The most that it would do is to confuse borrowers and sometimes mislead.
For example, a borrower might have a loan approved for $100,000 and would have to pay a 2% finance charge of $2,000. At the point of disbursement of funds, the $2,000 is directly deducted from the funds resulting in the borrower getting $98,000.
The amount financed in this case would then be $98,000. But that does not change the fact that the borrower’s loan is for $100,000 and would make payments to principal and interest based on that $100,000 instead of $98,000.
So the next time you see amount financed, just roll your eyes at the manner these financial information has been presented to you.
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