Question

Your credit score in this example means most companies will loan you money at ten percent interest. Based upon the ten percent interest rate, which answer would be an example of "predatory lending"? A. A company agrees to loan you money at ten percent interest. B. A company agrees to loan you money at twenty percent interest. C. A company agrees to loan you money at five percent interest. D. A company agrees to give you six months of interest-free money then charges you ten percent interest.

Answer 1

The correct answer is B. Predatory lending means that the lender agrees to loan money at an interest rate that is higher than what it should be. Since the other options will loan money at an interest rate of 10% or less, they are not predatory, because the fair rate is 10%. On the other hand, 20% is much higher than it should be, making B a predatory lender.