Federal lending law (the Truth in Lending Act, mostly) requires lenders to disclose loan terms in a standardized format. That standardization is mostly good — it means you can compare apples to apples — but the disclosures themselves are dense and full of regulatory language that puts most borrowers to sleep before they’ve absorbed the important parts.

Here’s the shortlist I’d ask any borrower to focus on when comparing two or three personal-loan offers.

Compare APR, not interest rate

Interest rate is what the lender wants to charge in nominal terms. APR is the total annual cost, including fees, expressed as a single percentage. Two loans with the same interest rate can have very different APRs. Always compare APR. Federal law requires every lender to disclose it.

Compare “amount financed” against “loan amount”

Loan amount is what you borrow. Amount financed is what you actually receive in your bank account. The difference — if any — is the origination fee or other deducted charges. If a $10,000 loan only deposits $9,500 into your account, the lender is charging a 5% origination fee. (You still owe interest on the full $10,000.)

Compare total cost of credit, not monthly payment

This is the dollar amount you’ll pay over the life of the loan, including all principal and interest. It’s usually disclosed as “Total of Payments” or similar. A loan with a low monthly payment over a long term can have a much higher total cost than a loan with a higher monthly payment over a shorter term. The total cost is the honest number.

Check for fixed vs variable rate

Disclosures will say either “fixed rate” or “variable rate.” Fixed means your payment is the same every month for the life of the loan. Variable means it can change. For personal loans, fixed is the default; variable is unusual and worth questioning if you see it.

Check for prepayment penalty

Required disclosure under TILA. Look for a clear yes/no on whether you’ll be charged for paying the loan off early. The best lenders have no prepayment penalty (ours don’t).

Read the late-payment and default sections

What happens if you miss a payment? How long is the grace period? What does the late fee look like? When does the lender refer the account to collections? These aren’t fun things to think about going in, but they’re the difference between a lender who’ll work with you if life happens and one who won’t.

What to skip (for now)

The mandatory arbitration clauses, governing-law language, and assignment-of-loan provisions are mostly standardized across lenders and rarely the place where lenders differentiate. Skim them, but don’t spend your decision time there. Spend it on the five items above.

— Ted Booker, General Counsel