Question

Amir is researching loans offers. When he compared a loan from a bank or credit union to a payday loan, he found the payday loan

a) Has lower interest rates
b) Is more affordable in the long run
c) Has higher fees and interest rates
d) Offers better repayment terms

Answer 1

c) Has higher fees and interest rates

A payday loan typically has higher fees and interest rates than a loan from a bank or credit union and does not offer favorable repayment terms.

Step-by-step explanation:

When comparing a loan from a bank or credit union to a payday loan, it is generally found that a payday loan has higher fees and interest rates (c). This is because payday loans are short-term, high-cost loans that are intended to be repaid at the borrower's next payday. Though they provide quick access to cash, they come with the cost of very high annual percentage rates (APRs) and could lead to a cycle of debt if not managed properly. Additionally, payday loans usually do not offer favorable repayment terms, often requiring full repayment within a short period.

Answer 2

A payday loan generally has higher fees and interest rates than a loan from a bank or credit union, making it less affordable in the long run. Interest rates have a significant impact on the attractiveness and cost of loans.

Step-by-step explanation:

When comparing a loan from a bank or credit union to a payday loan, it is generally found that a payday loan has higher fees and interest rates. While payday loans offer quick cash and the convenience of easy approval, they are notorious for their exorbitant costs in the form of high-interest rates and fees. This is in contrast to traditional bank loans or those from credit unions, which usually have more stringent application processes but offer lower interest rates and better repayment terms over the long term.

From the information provided about loans and interest rates, it can be inferred that the affordability and attractiveness of a loan are dependent on interest rates, repayment history, and the current economic state. For instance, a loan is considered less attractive and thus one might pay less for it if the interest rates have risen since the loan was made. Conversely, if the economic interest rates have fallen, then the existing loan is worth more.