Test your knowledge

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You can get a short-term loan from your checking account through what is called _______.

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Overdraft protection

A checking account loan

A cash advance

Overdraft protection. Overdraft protection simply means overdrawing your checking account. You will likely be charged a fee for it.

It is possible to pay more in fees on a payday loan than the amount you originally borrowed.

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True

False

True. If you extend the loan or take out a different one to cover it, and you did this several times in a row, you might actually pay more in interest than the actual loan itself.

What do borrowers use payday loans for?

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Medical emergencies

Regular bills

As an alternative to other loans

All of the above

All of the above. People take out payday loans for many different reasons.

How good does your credit need to be in order for you to take out a payday loan?

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Excellent

Very good

Average

It doesn't need to be good

It doesn't need to be good. You don't need good credit in order to get a payday loan. Many borrowers do not have good credit.

The interest rates on payday loans are _______.

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Higher than those of banks or credit unions

Lower than those of banks or credit unions

Normal

Higher than those of banks or credit unions. Interest rates on payday loans are generally much higher than those of other loans.

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