Financial Counseling Certification Program (FiCEP) Practice Exam

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Prepare for the Financial Counseling Certification Program (FiCEP) Exam. Explore comprehensive flashcards and multiple choice questions that offer detailed hints and explanations. Ace your exam with our tailored resources and in-depth study materials!

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What might be a consequence of borrowing from payday lenders?

Reduction in ongoing debt
Increased financial flexibility
Higher overall debt levels
Improved credit score

The correct answer is: Higher overall debt levels

Borrowing from payday lenders often leads to higher overall debt levels due to the nature of their lending practices. Payday loans typically come with very high interest rates and short repayment periods, which can create a cycle of debt where borrowers may take out additional loans to pay off previous ones. This cycle can result in escalating fees and interest, quickly increasing the total amount owed. Additionally, many borrowers do not have the means to repay the loan on time, leading them to renew or roll over the loan, incurring even more debt. As a result, the financial burden on the individual increases significantly, which is a critical concern associated with reliance on payday lenders.