How does lenders yield compare to effective borrowing costs (EBC)?

The correct choice highlights that effective borrowing costs (EBC) take into consideration additional upfront expenses associated with obtaining a loan, such as origination fees, underwriting fees, and other closing costs. This comprehensive view of the costs provides borrowers with a clearer perspective on the true cost of borrowing beyond just the interest rate.

In contrast, a lender's yield typically focuses on the interest and fees that generate income for the lender but does not necessarily include all upfront expenses. Understanding the difference is crucial for borrowers because it influences their decision-making process, ensuring that they are aware of the total costs they will incur over the life of a loan. Being informed about EBC helps borrowers compare different loan products and make better financial choices based on their overall financial situation.