Test your knowledge

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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.

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.

When you take out a payday loan, how long is the grace period for paying it back?

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Two weeks

One month

Two months

There is no grace period.

There is no grace period. Payday loans do not offer grace periods; you must pay them back on your payday or you will be charged late fees.

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.

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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