Test your knowledge

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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.

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.

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 is a typical fee on a payday loan?

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15%

50%

100%

15%. Fee rates range from 15-20% of the amount borrowed.

Predatory lending can be identified by _______.

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Its high costs

Its low costs

Its high costs. Predatory lending involves a business charging higher-than-normal costs of various kinds.

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