Payday loan quick quiz
You’ll need
- A4 paper
- Pens or pencils
- Copies of the scenarios
A payday loan is a quick loan you borrow for a short time, but it costs a lot of extra money called high interest. It might seem like an easy way to get cash fast, but the fees can add up quickly and make it hard to pay back.
If you don’t pay it back on time, you could owe even more and get stuck in a cycle of debt. This can cause serious money problems and stress.
If you’re having money troubles, don’t turn to payday loans. Instead, talk to a trusted adult, such as a family member or teacher, or contact a free money advice service, such as your bank, Citizens Advice, StepChange, or MoneyHelper. They can help you find safer ways to manage your money and get support.
How to spot pay day loans:
- They promise quick cash with little or no credit check.
- They require you to pay back the loan very fast, often by your next payday.
- They ask for your bank details upfront.
- They have very high interest rates and fees.
- They use urgent language, pushing you to act fast.
Some examples:
Jack needed £200 quickly to fix his bike. He took out a payday loan, but it came with very high fees. When it was time to pay it back, he owed £280 instead of just £200. Since Jack couldn’t pay the extra amount all at once, the debt kept growing, causing him more stress and money problems.
Darcy needed £200 for new university supplies, but didn’t want to get stuck with a payday loan’s high fees. She asked her parents if she could borrow the money and agreed to pay them back slowly from her part-time job. This way, Darcy avoided expensive debt and got the help she needed.
This activity may touch on sensitive topics, such as food, money or food banks, which some young people or their families might be affected by.
It’s important to create a safe, positive and supportive space where everyone feels comfortable. Let everyone know it’s okay to ask questions, say if they feel unsure, or step away at any time. Always follow the Yellow Card.
You might need to make adjustments, such as:
- Tell people about the activity in advance
- Offer the option to leave or do an alternative activity
- Speak with parents or carers beforehand
- Remind everyone they can talk to a trusted adult if they’re upset or worried
You can offer trusted support services if needed, such as Childline (0800 1111), Citizen’s Advice (0808 223 1133) and Crimestoppers (0800 555 111).
The Trussell Trust is a great place to start looking for a food bank near you. You can find details of independent food banks online. The UK Government have some debt advice support too.
Make sure that all adult volunteers and young leaders keep all discussions age-appropriate and supportive.
Before you begin
- Use the safety checklist to help you plan and risk assess your activity. There’s also more guidance to help you carry out your risk assessment, including examples.
- Make sure all young people and adults involved in the activity know how to take part safely.
- Make sure you’ll have enough adult helpers. You may need some parents and carers to help.
Planning and setting up this activity
- Print out or write out the scenarios and answers.
Running this activity
- Gather the group and ask if anyone knows what a payday loan is. You could use the information on this page.
- Get into small groups.
- Give each group a pen and paper. You may wish to give each group a copy of the scenarios too.
- Explain that you’ll read out the scenarios, then they should decide whether it’s a safe financial decision or payday loan.
- Teams should write down their answers.
- The team that gets the most correct answers wins.
Scenarios and answers
Tom’s phone broke just before his big exam. He’s offered £100 from a loan company. He’s told he must pay it back in full in two weeks, plus £120 in fees. However, if he repays it early, there’s no extra charge.
Answer: Payday loan
Why: The short repayment period (2 weeks) and very high fee (£120 on a £100 loan) are typical of payday loans. These are often considered predatory because of the high cost and short repayment time.
Aisha needs £300 to repair her car. A bank offers her a loan of £300 with a fixed interest rate of 5% per year. The loan will be repaid over 12 months, with payments of £25 per month.
Answer: Legitimate loan
Why: This loan comes from a bank with a low fixed annual interest rate (5%) and a clear, manageable repayment plan over 12 months. This is standard for legitimate personal loans.
Matt has £50 left to pay for his rent. A loan website offers him a £350 loan with the promise that he’ll receive the money in minutes. However, they charge a £150 fee for the loan. He must repay it in 10 days.
Answer: Payday loan
Why: The short repayment period (10 days) and high fee (£150 on a £350 loan) are classic signs of a payday loan. The fast money and high cost make it risky.
Olivia needs to pay her car insurance, but she doesn’t have enough money. A company offers her a £500 loan. The loan can be paid back over 3 months with a small interest rate, and the company doesn’t charge any early repayment fees.
Answer: Legitimate loan
Why: It has a clear small interest rate over 3 months with no penalty for early repayment. The terms are transparent and not excessive, unlike payday loans.
Leo needs £200 for an emergency. A loan company offers him £200 immediately, but they charge a high interest rate (400% APR), so he has to pay back £800. He must pay back the full amount in 14 days. If he misses the payment date, he will be charged even more.
Answer: Payday loan
Why: A 400% APR and 14-day repayment term are defining characteristics of a payday loan. The high penalty for missing a payment is also a red flag.
Kamil needs £100 for a train ticket to get home. A company offers him £100 but promises that if he repays within 10 days, he won’t have to pay any interest or fees. If he doesn’t repay on time, he will owe £250.
Answer: Payday loan
Why: While it seems interest-free at first, the penalty for late repayment (£250 on a £100 loan) is extremely high and predatory. This bait-and-switch tactic is common in payday scams.
Tilly is offered £500 from a payday loan company to help her buy furniture for her new flat. The loan must be paid back in 2 weeks with a 500% interest rate, but they promise no fees if she repays early.
Answer: Payday loan
Why: The 500% interest rate and 2-week repayment period are standard features of a payday loan. Even if there are no fees for early repayment, the high repayment makes it suspicious – it’s a scam!
Jamie needs £300 to repair their games console. A bank offers them a loan with a low interest rate and a manageable repayment plan spread over a year.
Answer: Legitimate loan
Why: This is a bank loan with a low interest rate and a reasonable repayment term (one year), which are signs of a legitimate and safe lending option.
Aim of the activity
The aim of this activity is to educate the young people about payday loans, the potential risks, and how to spot financial scams. The activity will involve teams working together to analyse scenarios, spot the scams, and decide which options are wise and which are risky. Teams will compete against each other to get the most correct answers.
Reflection
In this activity everyone learned about payday loans. Does anyone remember what a payday loan is? How do you spot one? Why are they risky? They do offer quick access to money, which is why they can be appealing, but you may end up owing lots of money and be in debt. There’s lots of other options. What can you do if you need financial assistance? Who can you speak to? What can you do if someone you know is offered a payday loan? If you or someone you know does have one, that’s OK, there’s lots of help to support people who didn’t realise the risk in managing payday loans.
Safety
All activities must be safely managed. You must complete a thorough risk assessment and take appropriate steps to reduce risk. Use the safety checklist to help you plan and risk assess your activity. Always get approval for the activity, and have suitable supervision and an InTouch process.
You must run your activities in line with the Safeguarding Code of Conduct for Adults (Yellow Card) and report any concerns to the UK HQ Safeguarding Team.
- Outdoor activities
You must have permission to use the location. Always check the weather forecast, and inform parents and carers of any change in venue.
To make this activity harder, you could create some harder scenarios.
Make it accessible
All Scout activities should be inclusive and accessible.
