Welcome to module twos cycle of debt. In avoiding an understanding payday loans, we talked about what a payday loan is and had a personal example of what leads to a person taking a payday loan. But did you know the issue is deeper than just one scenario? It's called the cycle of debt. The two most basic reasons why people fall into the payday loan trap are bad credit and a lack of savings. It is not easy to overcome either problem, let alone both. But since payday loans can easily trap you in a cycle that is most impossible to get out of, it is worth making the effort. Pete loans can easily trap you in a cycle of debt, when an emergency hits, and you have poor credit and no savings, it may seem like you have no other choice. But choosing a payday loan can negatively affect your credit and any savings you could have had and even land you in court. We have talked about why people think they need payday loans and who can supply them, but what are the requirements to get a payday loan? All the consumer needs to get a payday loan is an open bank account and relatively good standing. A steady source of income and identification. Lenders do not conduct a full credit check or ask questions to determine if a borrower can afford to repay the loan. This is why payday loans are popular with individuals with a lower credit score. Now that we have talked about how to qualify for a payday loan, let's talk about the actual loan process. When your loan is approved, the funds are deposited to the verify bank account, but even more important, the lender will require that you write a post dated check in the pavement of both the loan amount and the interest charge to it. For example, let's say that you are granted a $500 loan on October 16th. Since the loan will require repayment within two weeks, you will be required to write a check back to the lender that is dated for October 30th. The check will be for $575. 500 for the loan repayment, plus 75 for the interest. The post dated check ensures that the lender will be paid back by the scheduled date, and that they will not have to chase you to get it. Borrowers tolerate the post data check arrangement because the other major component that lenders normally look at, credit history, is ignored by payday lenders. The London will usually also require that your paycheck is automatically deposited into a verified bank. The post data check will then be set to coincide with the payroll deposit, ensuring that the post they check will clear the account. That's why they are called payday loans. Now, here's the problem that often leads borrowers into a cycle of debt. Consumer financial protection bureau, CFPB, found that 80% of payday borrowers tracked over ten months rolled over or reborn loans within 30 days. Borrowers default on one in 5 payday loans. Online borrowers fared far worse. CFPB found them more than half of online payday installment, loan sequences default. In 2012, their pew charitable trust released an extensive report on payday loans. 12 million Americans per year you've paid a lenders and borrowed $7 billion. The typical user borrows the average of $375, 8 times a year, and pays in total $520 in interest. Thank you for watching this module on payday loans. Please continue to the next one.