Who it’s for and what people take away
Adults who borrow now or may need to soon, including people who have used short-term loans, store credit or pay-later plans, or who are weighing up a loan offer.
By the end, people can:
- explain the difference between an interest rate and the total cost of a loan, including fees
- compare two or more loan offers using the same three questions
- recognize the warning signs of high-cost and predatory lending, and of loan scams that ask for a fee first
- name cheaper options to ask about, and where to complain or get free help in their country
Before the session
- Read the run sheet and the country block for where you are teaching, and open each official source once so you know what it says.
- Print one worksheet per person and one country handout per person, plus a few spares.
- Work through the three offers in the activity yourself, so you know the answers before the room does.
- Set up the room in small tables of three or four if you can, so people can work on the activity together.
- Check that the deck opens on the room’s screen, and have a printed copy in case it doesn’t.
- Note the name of any local free debt advice service your host recommends, and check it is free and not a lender.
You will need
- Projector or large screen
- Printed worksheets, one per person
- Printed country handouts, one per person
- Pens, and calculators or phones with a calculator
- Flip chart or whiteboard for the debrief
Run sheet
60 minutes. Slide numbers refer to the deck.
Session timings| Starts | Length | What happens |
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| 0:00 | 5 min | Welcome and ground rulesSlides 1–2Introduce yourself and say you work in or around financial services. Go through the ground rules on slide 2, especially that nobody shares their own figures.Say: “Nobody here will be asked about their own money. We’ll use made-up numbers, and you keep whatever you write.” |
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| 0:05 | 12 min | What a loan really costsSlides 3–6Explain where the cost of a loan comes from: interest, fees, add-ons and time. Introduce the three questions to ask. Walk through the worked example on slide 6, writing the two totals on the board.Say: “The monthly payment tells you whether you can afford a loan. The total you pay back tells you what it costs.” |
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| 0:17 | 15 min | Activity: compare three offersSlides 7Hand out worksheets. Groups fill in the comparison table for the three made-up offers, then you run the debrief. See the activity section for the offers and the answers. |
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| 0:32 | 10 min | High-cost and predatory lendingSlides 8–10Explain how short-term, high-cost loans work and how rollovers add up. Go through the signs of a predatory lender and of a loan scam that asks for a fee first.Say: “A lender that doesn’t ask whether you can afford it isn’t doing you a favor.” |
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| 0:42 | 8 min | Other options and where to get helpSlides 11–12Go through cheaper options to ask about first, and what to do if a loan has already gone wrong. Then turn to the country block: how to check a lender, where to complain and where free help is. |
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| 0:50 | 10 min | Questions and closeSlides 13Take questions, using the questions section if it helps. Hand out the country handout and point to the official sources on it. Ask everyone to write one next step on the worksheet before they leave. |
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Compare three offers
15 minutes, using the worksheet.
- Put people in groups of three or four. Read the three made-up offers aloud, and leave slide 7 on screen.
- Offer A: borrow 1,000. There is a 50 set-up fee taken out of the loan, so you receive 950. Then 12 monthly payments of 95.
- Offer B: borrow 1,000 with no fees. Then 24 monthly payments of 55.
- Offer C: borrow 1,000 and repay 1,150 in one payment in four weeks. If you can’t pay, you can pay just the 150 fee and push the due date back another four weeks.
- Groups fill in the table on the worksheet for each offer: what you actually receive, each payment, how many payments, the total you pay back, and the cost of borrowing (total paid back minus what you received).
- Then ask each group: if you couldn’t repay Offer C for three months, what would it cost? (Answer: three fees of 150 is 450, and you still owe the 1,000.)
- Answers for you: A costs 190 (1,140 paid back for 950 received). B costs 320 (1,320 for 1,000) but has the lowest monthly payment. C costs 150 if repaid on time, but it is due in one large payment and grows fast if rolled over.
Questions for the room afterwards
- Which offer looked cheapest at first glance, and which actually costs least in total?
- Why might someone still choose the offer with the lower monthly payment, and what should they check first?
- What happens with Offer C if money is tight when it falls due?
- What would you ask a lender before signing anything?
Take care
General information, never advice about one person’s situation, and nothing to sell.
- Never ask anyone about their own debts, loans or income, aloud or on paper, and don’t look at anyone’s worksheet unless they invite you to.
- Don’t name, recommend or criticize any lender, card, app or company, including ones people mention. Describe how products work, not who sells them.
- Don’t tell people never to borrow, and don’t shame anyone who has used a payday loan. People borrow because they need to; the session is about doing it with open eyes.
- Don’t give a view on someone’s particular loan or debt. Point them to the free complaint and debt advice routes on their country handout.
- Use only round, clearly made-up numbers, and don’t quote real interest rates, fee caps or limits beyond what the country block says.
Questions people ask
Is a payday loan ever a good idea?
It is legal in many places and some people use one without trouble. The risk is that it is usually due in one payment soon after you borrow, and if you can’t repay it in full, extra fees can pile up quickly. Before taking one, ask about the cheaper options on slide 11, and check the rules in your country on the handout.
Will shopping around for a loan hurt my credit?
It depends on the lender and the country. Some lenders can give you a quote without a full credit check, others check your credit file when you apply. Ask each lender whether getting a quote or applying will show on your credit report before you go ahead.
What about pay-later plans at the checkout?
They are a way of borrowing too. Ask the same three questions: what it costs in total, including any late fees, how many payments there are and when, and what happens if a payment fails. Several plans at once can be hard to keep track of, so write the dates down.
I’m already behind on a loan. What should I do first?
Contact the lender before the next payment is due and ask what help it offers, such as a payment plan. Get free debt advice from an official or not-for-profit service; you should never have to pay to be told your options. The country handout lists official routes.
Can a lender take money straight from my account?
If you agreed to automatic payments when you took the loan, the lender may be able to collect them. You can ask your bank how to stop or cancel an automatic payment, but you still owe the debt, so talk to the lender about a plan as well.
Where you are teaching
The rules differ by country. Teach the shared material from the slides, then use the block for the country you are in, and hand out that country’s sheet.
United States
- Lenders must show the APR. The federal Truth in Lending Act requires lenders to give you key loan terms, including the annual percentage rate (APR), before you finalize a loan such as a car loan. The APR includes the interest rate plus certain fees, so compare APR with APR, not with an interest rate.
- Payday loans depend on your state. State law decides whether payday loans are allowed, and many states limit their size and fees; some states don’t allow them. Payday lenders generally don’t check whether you can repay while meeting your other bills.
- Wages and court orders. A payday lender can only garnish your wages if it has a court order.
- Servicemembers. Under the Military Lending Act, active-duty servicemembers and their dependents have extra protections on payday and other consumer loans, including a 36 percent cap on the Military Annual Percentage Rate.
- Complaints. You can submit a complaint about a lender to the Consumer Financial Protection Bureau, which sends it to the company. Companies generally respond within 15 days.
United Kingdom
- Check the lender is authorised. Lenders must be authorised by the Financial Conduct Authority (FCA), and you can check on the FCA’s register. Loan sharks are illegal moneylenders; you can report one anonymously, including if you have borrowed from them.
- Payday loans are price-capped. The FCA has capped the cost of high-cost short-term credit, such as payday loans, since 2015, and restricts rollovers and how repeat payments are collected.
- Complain to the firm first. Firms must normally send you a final response to a complaint within 8 weeks. If you’re unhappy with it, the Financial Ombudsman Service is free; contact it within 6 months of the firm’s final response.
- Breathing Space. The Breathing Space scheme can give you temporary protection from creditors while you get help with debt. You apply through a debt adviser.
Canada
- Payday lenders are licensed by province. Each province sets its own payday loan rules, and payday lenders must have a licence there; the territories don’t have specific rules. Your provincial or territorial consumer affairs office can tell you whether a lender is licensed.
- Rollovers and wages. In most provinces a payday lender can’t extend or roll over your loan. Provincial laws stop payday lenders asking you to sign a form that transfers your wages directly to them.
- Lenders outside Canada. The Financial Consumer Agency of Canada warns that problems with online payday lenders based outside Canada may be difficult to resolve.
- A fee first is a warning sign. The Canadian Anti-Fraud Centre says it is illegal for a company to ask you to pay a fee upfront before it gives you a loan.
- Complaints. The Financial Consumer Agency of Canada explains how to complain to a federally regulated financial institution, starting with the institution’s own complaint process, and where to go next.
Australia
- Lenders need a credit licence. Businesses that engage in credit activities generally need an Australian credit licence, or authorisation from a licensee. ASIC’s professional registers list licensees, so you can check a lender before you borrow.
- Free guidance from the regulator. ASIC is Australia’s consumer credit regulator. Its free consumer website, Moneysmart, explains the costs of borrowing and steps to take if you fall behind on repayments.
- Complaints. Financial complaints can be taken to the Australian Financial Complaints Authority (AFCA). ASIC doesn’t resolve individual disputes, but you can report misconduct to it.