Payday loans
Training 495 minutespayday loans
You are 26, a salon receptionist. Payday is 10 days away and a toothache cannot wait: the dentist wants $400. An ad promises cash in 5 minutes.
Training goal: Cover the emergency without a loan spiral
▶ Play this trainingSituation
1. A payday lender offers $400 for two weeks. You must repay $460.
- Take it, $60 is not much
- Ask the dentist for a payment plan
- Borrow $200 from two lenders
2. A close friend took the loan. It is due tomorrow and there is no money. The lender offers a rollover for $60.
- Keep rolling over until things ease
- Take a new payday loan to repay the old one
- Ask for an extended payment plan with no new fees
3. Where else can you borrow for less?
- Ask your employer for a pay advance
- Pawn your phone
- Take a "no credit check" loan from social media
4. A month later everything is paid. How do you avoid this next time?
- Save the lender’s number "just in case"
- Set aside $40 every payday for a mini cushion
- Get a credit card with a high limit
What you will learn
- A 2-week payday loan at $15 per $100 costs about 390% a year.
- Rollovers burn money without shrinking the debt.
- Ask for a plan, an advance or help first. A mini cushion covers next time.
Your real-life step
Delete quick-loan apps from your phone and open an "emergency" pot with a first $20.
Questions and answers
Why are payday loans so expensive?
The fee covers a very short term. $15 per $100 for 2 weeks is about 390% when counted over a year.
What happens if I do not repay a payday loan?
Fees, collections and a mark on your credit record. Exact consequences depend on your country’s laws.
What are alternatives to payday loans?
A payment plan with the provider, a pay advance, help from family, a credit union or a low-rate card.
More trainings in this module
- Good debt vs bad debt
- APR explained
- Credit score
- How to build credit
- How to get out of debt
- Clearing debts: the snowball
Numbers are illustrative. A game, not financial advice.