Payday loans are a popular way in which loan companies offer loans to consumers in need of funds. Most of these consumers have bad credit and are unable to obtain credit and/or loans through traditional methods, such as a banking institution.

Assume your friend recently experienced a major financial loss and is in dire need of money to pay his medical bills from an injury sustained in the previous year. He decides to inquire about a payday loan through a local loan company. The loan company is offering him a $5,000 loan for a 27% interest rate with payments to occur monthly. He must use his car as collateral. Your friend thinks this is a great idea and decides to sign up for the opportunity. He asks you to go along with him to complete the paperwork and offer support.

What would you do in such a situation? Is this a good opportunity for your friend is it a great deal? What questions should you ask the loan officer when attending the meeting? Is this type of payday loan legal? Ethical? Explain.