Test your knowledge

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If you put up a guitar at a pawnshop in return for a loan, what usually happens if you can't pay the loan back?

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The pawnshop can keep the guitar.

Nothing

You get an extra week to pay off the loan.

None of the above

The pawnshop can keep the guitar. This is the general rule for how these loans work.

The interest rates of payday loans are very high.

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True

False

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

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.

What are some things that a payday lender could do if you did not pay back a payday loan you took out?

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Turn your loan over to a debt collector

Sue you

Repossess your property that you put up as collateral

All of the above

All of the above. All of these are possibilities.

As a general rule, which of the following will charge the LEAST amount of interest if you take out a loan?

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A payday lender

A credit card

A credit card cash advance

A loan from a bank or credit union

A loan from a bank or credit union. As a rule, these loans have the lowest interest rates and charge the least amount of interest.

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