Signs of
Predatory Lending
What to Watch Out For When
You’re Shopping for a Loan
Signs of Predatory Lending
Predatory Payday Lending
Three quarters of payday lending
revenue is generated by churned
loans.
www.responsiblelending.org
Signs of Predatory Lending
Predatory Payday Lending
Sign #1: Triple-digit interest rates.
Payday lenders often express the cost of their loans as fees. For
example, a payday loan may cost $15 per $100 loan for a twoweek period. This equates to an annual interest rate of 390%.
Requiring repayment of the full loan in a short period of time, plus
the fee, usually forces the borrower to take out back-to-back
loans.
www.responsiblelending.org
Signs of Predatory Lending
Predatory Payday Lending
Sign #2: Short-term due date.
Payday loans are due in full on the borrower’s next payday,
often two weeks, sometimes one week or a month. This
catches most borrowers in a cycle of repeat loans that put
them in a worse financial position than when they first
borrowed.
www.responsiblelending.org
Signs of Predatory Lending
Predatory Payday Lending
Sign #3: Bank account funds at risk.
Payday lenders secure their loans by holding the borrower’s signed
personal check for the amount of the loan plus the fee, or by
accessing the borrower’s bank account electronically. If the
borrower does not pay off the loan when its due, the lender can
deposit the borrower’s check, causing bounced check fees, which
can lead to closed bank accounts.
www.responsiblelending.org
Signs of Predatory Lending
Predatory Payday Lending
Sign #4: Cycle of Debt.
Payday borrowers frequently end up in a cycle of long-term,
high-cost debt. Payday borrowers have an average nine
loans per year from one lender, and most are taken shortly
after the previous is closed and before the borrower’s next
payday.
www.responsiblelending.org