Test your knowledge

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The interest rates of payday loans are very high.

Choose wisely. There is only one correct answer.

True

False

True. Payday loans have average annual interest rates of 500 percent--or more.

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.

A payday loan is designed to _______.

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Pay off your mortgage

Tide you over until your next paycheck

Provide an open-ended line of credit

Tide you over until your next paycheck. A payday loan is set up to pay short-term bills and to be repaid with your next paycheck.

A payday lender does not legally have to identify the fees charged to your payday loan.

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True

False

False. By law, a lender must spell out all fees to you in your contract.

If you put up your car as collateral for a car title loan, what happens to your car if you pay the loan back?

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The lender can still keep the car

You retain ownership of your car

Nothing

None of the above

You retain ownership of your car. As long as you pay the loan back, you legally must get your car back.

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