Nearpod version available
Grade 9-12
,
Lesson
How Expensive are Payday Loans?
Objective
Students will be able to:
- Determine the total cost of a payday loan when given the amount financed, finance charge, and terms of the loan in weeks.
- Graph the relationship between the number of times a payday loan is renewed and the total cost of the loan.
- Rearrange the equation for the total cost of a payday loan to determine the finance charge.
Standard
National Standards in Economics
Interest Rates
Standard: 12
- Students will understand that: Interest rates, adjusted for inflation, rise and fall to balance the amount saved with the amount borrowed, which affects the allocation of scarce resources between present and future uses.
- Students will be able to use this knowledge to: Explain situations in which they pay or receive interest, and explain how they would react to changes in interest rates if they were making or receiving interest payments.
National Standards in Financial Literacy
Investing
Standard: 4
- Students will understand that: People can choose to invest some of their money in financial assets to achieve long-term financial goals, such as buying a house, funding future education, or securing retirement income. Investors receive a return on their investment in the form of income and/or growth in value of their investment over time. People can more easily achieve their financial goals by investing steadily over many years, reinvesting dividends, and capital gains to compound their returns. Investors have many choices of investments that differ in expected rates of return and risk. Riskier investments tend to earn higher long-run rates of return than lower-risk investments. Investors select investments that are consistent with their risk tolerance, and they diversify across a number of different investment choices to reduce investment risk.
![](https://preview2.econedlink.org/wp-content/uploads/legacy/EconEdLink-1211-.jpg 1w)
In this personal finance lesson, students will learn how a payday loan works.
Resources
Procedure
Click NEARPOD VERSION: HOW EXPENSIVE ARE PAYDAY LOANS? to access an interactive version of the lesson powered by Nearpod: students interact and respond to questions on their device, and teachers will see their responses in real time!