face interest rate

Face Interest Rate

The interest rate listed on a loan agreement. The face interest rate may bear little relation to the interest actually paid because the face rate does not indicate how often interest compounds. The annual effective rate is a better measure of interest. However, for the sake of simplicity, some lenders may list the annual effective rate as the face interest rate. It should not be confused with the nominal interest rate.

Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

face interest rate

The interest rate shown on the face of a promissory note and used to calculate the monthly payments on a loan. In order to help borrowers compare apples to apples when shopping for a lender,the federal Truth in Lending Act requires lenders to reveal an annual percentage rate which includes the “face interest rate” plus the value of some closing costs and prepaid expenses.

The Complete Real Estate Encyclopedia by Denise L. Evans, JD & O. William Evans, JD. Copyright © 2007 by The McGraw-Hill Companies, Inc.