Loan Net Proceeds & Real APR Auditor TILA Compliant

Audit personal loan origination fee drag, gross-up cash requirements, and true finance charges.

Comparison Evaluation Framework

Switch between equal borrowed principal and equal target cash arriving in borrower's checking account.

Stated Principal Mode: Both lenders execute a $10,000 promissory note. Offer A deposits full $10,000 cash. Offer B deducts an 8% origination fee ($800), depositing only $9,200 cash in hand.

Offer A (Zero Fee, Higher Rate)

Direct baseline installment loan

0% Origination
Cash in Hand vs Deducted Fee $10,000 Net / $0 Fee
Net Cash Received $10,000.00
Disclosed True APR 12.00%
Monthly Payment $332.14
Total Finance Charge $1,957.15

Offer B (8% Fee, Lower Rate)

Deducted origination fee structure

8% Deducted Fee
Cash in Hand vs Deducted Fee $9,200 Net / $800 Fee
Net Cash Received $9,200.00
Disclosed True APR 14.78%
Monthly Payment $317.99
Total Finance Charge $2,247.90

Truth in Lending Act (TILA) Audit Comparison Schedule

Audit Field / Regulation Z Metric Offer A Offer B Variance / Difference (B vs A)
Stated Nominal Interest Rate 12.00% 9.00% -3.00% (lower nominal)
Gross Promissory Note (Principal) $10,000.00 $10,000.00 $0.00
Upfront Origination Fee Deducted $0.00 $800.00 +$800.00
Actual Net Cash Disbursed to Account $10,000.00 $9,200.00 -$800.00 shortfall
Monthly Installment Payment $332.14 $317.99 -$14.15/mo
Total of Monthly Payments $11,957.15 $11,447.90 -$509.25
Total Finance Charge (Interest + Fees) $1,957.15 $2,247.90 +$290.75 higher credit cost
Disclosed True TILA APR (Annual Percentage Rate) 12.00% 14.78% +2.78% higher APR

CFPB & Rate-Shopping Mechanics: Why Lower Interest Can Mean Less Cash

Under Truth in Lending Act (TILA) Regulation Z, an origination fee is part of the prepaid finance charge. Lenders routinely advertise a low nominal interest rate (e.g., 9%), but deduct fees directly from your funding before disbursement:

1. Stated Rate vs. True APR The nominal rate computes periodic interest solely on the outstanding principal balance. The APR factors in prepaid fees amortized over the loan term, yielding the true annual economic cost of credit (14.78% vs 12.00%).
2. The Gross-Up Trap If you need an exact sum ($10,000 for medical debt or home renovation), an 8% deducted fee leaves you $800 short. To actually receive $10,000, you must borrow $10,000 รท (1 - 0.08) = $10,869.57, incurring interest on the extra fee.
3. Early Prepayment Risk Prepaid origination fees are earned immediately by the lender upon funding. If you pay off Offer B in 12 months, the effective APR spikes even higher because that $800 fee is spread across fewer payments.