W!SE Financial Literacy Certification Practice Test 2026 - Free W!SE Financial Literacy Practice Questions and Study Guide

Charging extremely high fees to poorly informed borrowers represents a clear example of predatory lending because it exploits individuals who may lack the necessary financial literacy to understand the terms and consequences of their loans. Predatory lending takes advantage of vulnerable populations by offering loans that come with exorbitant fees and interest rates, often without clear disclosure of these terms.

In this context, borrowers who are unaware of their rights or the market standards can find themselves trapped in a cycle of debt, unable to repay the loan due to the excessive costs associated with it. Predatory lenders often use deceptive practices, creating an illusion of affordability while ultimately taking advantage of the borrower's lack of knowledge or financial savvy.

The other options do not embody the characteristics of predatory lending. For instance, offering loans without any fees demonstrates a favorable lending practice that is in line with consumer-friendly approaches. Providing loans backed by government regulations typically involves transparency and consumer protections that safeguard borrowers. Advising borrowers to avoid high-interest loans reflects a responsible approach that encourages financial wellness and smart borrowing choices.