To compensate for high default risk, payday lenders rely on:

Question

Quizplus · Accepted Answer

Payday lenders typically rely on borrowers providing post-dated checks as collateral against the loan. These checks serve as a promise to repay the loan on the borrower's next payday. To compensate for the high default risk associated with borrowers who may have poor credit or limited financial resources, payday lenders charge very high interest rates. Therefore, the correct answer is B.

To Compensate for High Default Risk, Payday Lenders Rely On