Test your knowledge

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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.

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.

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.

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.

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