What term describes the amount a lender charges to borrow money?

The finance charge refers to the total cost of borrowing money from a lender, which can include interest as well as additional fees that may be incurred during the loan process. This figure is crucial for borrowers as it gives them a clear idea of how much they will end up paying in total for taking out a loan. The finance charge encompasses various aspects of the borrowing process, such as administrative fees and any other costs associated with securing the loan, thus providing a comprehensive understanding of the expenses involved in borrowing.

The other terms have specific meanings that do not capture the totality of costs associated with borrowing. The loan amount simply refers to the sum of money that is borrowed, while the principal denotes the actual amount of the loan without considering additional costs. The interest rate represents the percentage charged on the principal for borrowing the money, but it does not include other possible fees or charges that could make up the finance charge. Therefore, the term that accurately describes the overall charges for borrowing money is the finance charge.