Which factor is key in determining the high-cost nature of a loan?

The key factor in determining the high-cost nature of a loan is the difference from a standard benchmark. In lending, certain thresholds or benchmarks are used to assess whether a loan is considered high-cost. These benchmarks can include interest rates, fees, and other terms that are compared to standard or conventional loan products. If a loan's terms exceed these benchmarks, it may be categorized as high-cost, which triggers additional regulatory scrutiny and protections for borrowers.

Understanding this distinction is important because it helps consumers recognize loans that may impose significant financial burdens due to unfavorable terms compared to conventional options. Other factors, such as the frequency of payments, total loan amount, and duration of the loan, play a role in the overall loan structure but are not definitive indicators of whether a loan is high-cost in the context set by regulatory frameworks.