4.05 Predatory Lending & Debt Management

Last updated 5 months ago

26 questions

Note from the author:

Instructions

4.05 Predatory Lending & Debt Management

Last updated 5 months ago

26 questions

Note from the author:

Instructions

What do you think the cartoonist is trying to convey about payday loans?

EDPUZZLE: Predatory Lending 📷7 min
Payday lenders don’t actually have a giant mousetrap strapped outside of their buildings to warn you of possible danger, so it’s better for you to understand how they work. Watch this video and follow your teacher's directions to answer the questions either in your student activity packet or within the EdPuzzle itself.

Payday loans usually have low interest rates__________
Payday loans do not have any additional fees like other types of unsecured loans__________
Payday loans get borrowers into a sometimes inescapable cycle of borrowing money because of the high interest rates and fees__________
To qualify for a payday loan you must have a checking account and excellent credit score__________

ACTIVITY: INTERACTIVE: Shady Sam 📷25 min
Maybe the previous resource is right, and payday lenders are playing a vital role in some communities. But is that always the case? You’ll get to try being a loan shark yourself in this game. Follow the directions onscreen and on the worksheet to complete this activity.

Part II: Reflection Questions
Reflect on your emotional state as you played the game and saw your total profits at the end. Explain why you felt that way.

How do the Annual Percentage Rates (APRs) on payday loans get to be so high?
The loans go to affluent banking customers, so they charge a lot for the exclusivity
The loan amounts are small, but the fees charged are relatively high and are renewed on a very short time-scale
They make most of their money through ATM withdrawal fees as well as overdraft fees on checking accounts
The amount of money people borrow using payday loans is typically quite high – $10,000 or more – so the fees are also high

Three of these statements reflect payday loans. Choose the other statement, which is aligned with a traditional bank loan instead.
Easy to obtain without a lot of paperwork__________
Requires a credit check and suitably high credit score__________
Requires payment in full in less than a month__________
APR can easily be over 200%__________

Why are payday loans so popular?
They are a fast, easy way to save money and budget effectively
They meet the need for quick cash for very large purchases such as cars and homes
They are a terrific way to build your credit history and improve your credit score
They are accessible to people who need to borrow small amounts of money and don’t have any better options

VIDEO: What Happened When I Didn't Pay a Debt Collector 📷7 min
Many people choose to take out debt for a variety of reasons, like taking out an auto loan to buy a car or a mortgage to buy a home. That’s when the responsibility of making timely payments comes into play. Watch the video to hear the story of JoAnn and her experience with debt. Then, answer the questions.

Describe a time in your life when you should have been more proactive, but procrastinating ended up hurting you in the long run.

What are some things you can do to make sure you don’t end up in the same situation you described above, or in JoAnn’s situation, when it comes to managing your debt?

You only have 2 options to get out of debt:  
1.  Increase your INCOME
2.  Decrease your expenses. 

How can you do either of these options:  
8 Strategies for Getting Out of Debt
● Gather Your Data
● Make a Financial Inventory
● Lower Your Interest Rates
● Pay More Than the Minimum
● Increase Your Income
● Cut Unnecessary Spending
● Create a New Budget
● Create an Emergency Fund

One of the strategies suggests increasing your income by doing things like asking for a raise, starting a side hustle, or even getting a second job. Although it would be effective, what problems could come from doing these things and why might it be difficult for some people?

Are there any other strategies you think you would struggle with more than others? If so, explain why.

EDPUZZLE: Strategies for Debt Repayment 📷8 min 
The snowball and high rate methods are two popular strategies to pay down multiple debts. Watch this video and follow your teacher's directions to answer the questions either in your student activity packet or within the EdPuzzle itself.

The AVALANCHE METHOD of getting out of debt requires you to pay the MOST amount of money on the debt with the__________ interest rate.

ARTICLE: Legal Actions Creditors Can Take If You Don't Pay  📷5 min
Even if you use the strategies you just learned about to help pay off your debt, it’s possible that you might still reach a point where payments become difficult to make. Depending on the type of debt you have, the potential consequences that come can vary. Read the article. Then, answer the questions.

4.05 Predatory Lending & Debt Management

4.05 Predatory Lending & Debt Management

What do you think the cartoonist is trying to convey about payday loans?

EDPUZZLE: Predatory Lending 📷7 min

ACTIVITY: INTERACTIVE: Shady Sam 📷25 min

Part II: Reflection QuestionsReflect on your emotional state as you played the game and saw your total profits at the end. Explain why you felt that way.

VIDEO: What Happened When I Didn't Pay a Debt Collector 📷7 min

Describe a time in your life when you should have been more proactive, but procrastinating ended up hurting you in the long run.

What are some things you can do to make sure you don’t end up in the same situation you described above, or in JoAnn’s situation, when it comes to managing your debt?

One of the strategies suggests increasing your income by doing things like asking for a raise, starting a side hustle, or even getting a second job. Although it would be effective, what problems could come from doing these things and why might it be difficult for some people?

Are there any other strategies you think you would struggle with more than others? If so, explain why.

What types of consequences can occur if you don’t pay your loans?

What types of property can be seized if you don’t pay your loans?

What do you think the cartoonist is trying to convey about payday loans?

EDPUZZLE: Predatory Lending 📷7 min

What type of marketing techniques do predatory lenders use? Hint: Choose two correct answers.

Based on what you've learned so far, what do you think is the average annual percentage rate (APR) on a payday loan?

ACTIVITY: INTERACTIVE: Shady Sam 📷25 min

Part I: Play Shady SamGo to shadysam.com. Enter your first name and click START PLAYING.End of the game: Take a screenshot of the final email and paste it below. Then, click “Clock Out” and continue to answer the rest of the questions.

Part II: Reflection QuestionsReflect on your emotional state as you played the game and saw your total profits at the end. Explain why you felt that way.

As an employee of Shady Sam, your goal was to maximize profits. How well do you think you did?

Which loan kept the borrower returning for extensions? Why do you think these loans are popular despite trapping borrowers in a cycle of debt?

One of the most profitable loans that you offered was the adjustable-rate mortgage. What risk is the borrower taking with this loan?

VIDEO: What Happened When I Didn't Pay a Debt Collector 📷7 min

Describe a time in your life when you should have been more proactive, but procrastinating ended up hurting you in the long run.

What are some things you can do to make sure you don’t end up in the same situation you described above, or in JoAnn’s situation, when it comes to managing your debt?

One of the strategies suggests increasing your income by doing things like asking for a raise, starting a side hustle, or even getting a second job. Although it would be effective, what problems could come from doing these things and why might it be difficult for some people?

Are there any other strategies you think you would struggle with more than others? If so, explain why.

All of the following are examples of debt except…Credit Card balanceScholarshipStudent loanAuto loan

If you are using the Snowball Method to get out of debt, which debt do you focus on first after you've made all of your minimum payments?The debt with the highest balanceThe debt with the highest interest rateThe debt with the lowest interest rateThe debt with the lowest balance

Which is a disadvantage of using loan CONSOLIDATION to pay down debt?There are multiple due dates for your loan paymentsThe new loan may have a lower interest rateYou have to keep track of multiple loansThe new loan may have a higher interest rate

What types of consequences can occur if you don’t pay your loans?

What types of property can be seized if you don’t pay your loans?

What type of marketing techniques do predatory lenders use? Hint: Choose two correct answers.

Based on what you've learned so far, what do you think is the average annual percentage rate (APR) on a payday loan?

Part I: Play Shady SamGo to shadysam.com. Enter your first name and click START PLAYING.End of the game: Take a screenshot of the final email and paste it below. Then, click “Clock Out” and continue to answer the rest of the questions.

As an employee of Shady Sam, your goal was to maximize profits. How well do you think you did?

Which loan kept the borrower returning for extensions? Why do you think these loans are popular despite trapping borrowers in a cycle of debt?

One of the most profitable loans that you offered was the adjustable-rate mortgage. What risk is the borrower taking with this loan?

All of the following are examples of debt except…Credit Card balanceScholarshipStudent loanAuto loan

If you are using the Snowball Method to get out of debt, which debt do you focus on first after you've made all of your minimum payments?The debt with the highest balanceThe debt with the highest interest rateThe debt with the lowest interest rateThe debt with the lowest balance

Which is a disadvantage of using loan CONSOLIDATION to pay down debt?There are multiple due dates for your loan paymentsThe new loan may have a lower interest rateYou have to keep track of multiple loansThe new loan may have a higher interest rate

Part II: Reflection Questions
Reflect on your emotional state as you played the game and saw your total profits at the end. Explain why you felt that way.

Part I: Play Shady Sam
Go to shadysam.com. Enter your first name and click START PLAYING.
End of the game: Take a screenshot of the final email and paste it below. Then, click “Clock Out” and continue to answer the rest of the questions.

Part II: Reflection Questions
Reflect on your emotional state as you played the game and saw your total profits at the end. Explain why you felt that way.

All of the following are examples of debt except…
Credit Card balance
Scholarship
Student loan
Auto loan

If you are using the Snowball Method to get out of debt, which debt do you focus on first after you've made all of your minimum payments?
The debt with the highest balance
The debt with the highest interest rate
The debt with the lowest interest rate
The debt with the lowest balance

Which is a disadvantage of using loan CONSOLIDATION to pay down debt?
There are multiple due dates for your loan payments
The new loan may have a lower interest rate
You have to keep track of multiple loans
The new loan may have a higher interest rate

Part I: Play Shady Sam
Go to shadysam.com. Enter your first name and click START PLAYING.
End of the game: Take a screenshot of the final email and paste it below. Then, click “Clock Out” and continue to answer the rest of the questions.

All of the following are examples of debt except…
Credit Card balance
Scholarship
Student loan
Auto loan

If you are using the Snowball Method to get out of debt, which debt do you focus on first after you've made all of your minimum payments?
The debt with the highest balance
The debt with the highest interest rate
The debt with the lowest interest rate
The debt with the lowest balance

Which is a disadvantage of using loan CONSOLIDATION to pay down debt?
There are multiple due dates for your loan payments
The new loan may have a lower interest rate
You have to keep track of multiple loans
The new loan may have a higher interest rate