High-interest loans and their impact on borrowers is a topic that has appeared in IELTS Writing Task 2 several times in recent years. Based on trends in past exams and current global financial issues, it’s likely to remain a relevant topic for future tests. Let’s examine a sample question that closely resembles those seen in actual IELTS exams:
Some people believe that high-interest loans from financial institutions exploit people in financial difficulty. Others think these loans provide a necessary service to people who cannot get credit elsewhere. Discuss both views and give your own opinion.
This question touches on a complex and controversial issue in personal finance, making it an excellent topic for IELTS candidates to demonstrate their critical thinking and writing skills.
Analysis of the Question
This question is asking you to:
- Discuss the view that high-interest loans exploit people in financial difficulty
- Discuss the opposing view that these loans provide a necessary service
- Give your own opinion on the matter
It’s important to address all three parts in your essay to fully answer the question. Let’s look at sample essays for different band scores.
Sample Essay 1 (Band 8-9)
High-interest loans, often provided by payday lenders or certain financial institutions, have become a contentious issue in modern society. While some argue that these loans prey on the financially vulnerable, others contend that they serve a crucial purpose for those with limited credit options. In my opinion, while high-interest loans can provide short-term relief, they often lead to long-term financial hardship and should be more strictly regulated.
Those who criticize high-interest loans argue that they exploit people in desperate financial situations. These critics point out that the exorbitant interest rates, sometimes exceeding 400% APR, trap borrowers in a cycle of debt. For instance, a person borrowing $500 might end up paying back over $2000 due to compound interest and fees. This financial burden can lead to severe consequences such as bankruptcy, eviction, or the inability to afford basic necessities. Moreover, these loans often target low-income communities and individuals with poor credit scores, who are least able to bear such financial strain.
On the other hand, proponents of high-interest loans argue that they provide a vital service to those who cannot access traditional forms of credit. For many individuals with poor credit histories or irregular income, these loans may be the only option in times of emergency. Supporters contend that without these loans, people might resort to even more dangerous alternatives, such as illegal loan sharks. Furthermore, they argue that the high interest rates reflect the risk taken by lenders when dealing with borrowers who have a higher likelihood of default.
In my view, while high-interest loans can offer temporary relief in emergencies, their long-term consequences often outweigh the short-term benefits. The predatory nature of many of these loans, with their opaque terms and aggressive collection practices, can push borrowers deeper into financial distress. Instead of relying on such loans, I believe that more sustainable solutions should be promoted. These could include financial education programs, community-based lending initiatives, and stricter regulations on interest rates and lending practices.
In conclusion, high-interest loans present a complex issue with valid arguments on both sides. However, given the potential for exploitation and long-term financial harm, I believe that alternative solutions and stronger consumer protections are necessary to address the needs of financially vulnerable individuals without subjecting them to potentially ruinous debt.
[Word count: 377]
Explanation of Band 8-9 Score
This essay would likely receive a Band 8-9 score for the following reasons:
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Task Response: The essay fully addresses all parts of the task, discussing both viewpoints and clearly stating the writer’s own opinion.
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Coherence and Cohesion: The essay is well-organized with a clear introduction, body paragraphs for each viewpoint, and a conclusion. Cohesive devices are used effectively to link ideas.
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Lexical Resource: The essay demonstrates a wide range of vocabulary used accurately and appropriately. Complex terms like “exorbitant,” “compound interest,” and “predatory nature” are used correctly.
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Grammatical Range and Accuracy: The essay uses a variety of complex sentence structures with a high degree of accuracy. For example, “For many individuals with poor credit histories or irregular income, these loans may be the only option in times of emergency.”
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Development of Ideas: Each point is well-developed with explanations and examples, showing in-depth understanding of the topic.
Sample Essay 2 (Band 6-7)
High-interest loans are a big problem in many countries. Some people think these loans are bad because they take advantage of poor people, but others say they help people who can’t get normal loans. I will discuss both sides and give my opinion.
People who don’t like high-interest loans say they are unfair to poor people. These loans have very high interest rates, sometimes more than 100%. This means if someone borrows $100, they might have to pay back $200 or more. This is very hard for people who don’t have much money. Many people who take these loans end up in more debt because they can’t pay them back. This can cause big problems like not being able to pay rent or buy food.
On the other hand, some people think high-interest loans are helpful. They say that these loans give money to people who can’t get loans from normal banks. For example, if someone has a bad credit score, they might not be able to get a loan from a bank. But they can get a high-interest loan if they need money quickly for an emergency. Without these loans, some people might have to borrow money from dangerous illegal lenders.
In my opinion, high-interest loans cause more problems than they solve. While they might help in the short term, they often make people’s money problems worse in the long term. I think there should be other ways to help people who need money quickly. Maybe the government could make special low-interest loans for poor people, or there could be more education about how to manage money.
To conclude, high-interest loans are a complicated issue. They can help some people in emergencies, but they also cause many problems. I believe we need to find better ways to help people who need money without making them pay such high interest rates.
[Word count: 309]
Explanation of Band 6-7 Score
This essay would likely receive a Band 6-7 score for the following reasons:
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Task Response: The essay addresses all parts of the task, discussing both viewpoints and stating the writer’s opinion. However, the ideas are not as fully developed as in the Band 8-9 essay.
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Coherence and Cohesion: The essay has a clear structure with an introduction, body paragraphs, and conclusion. However, the use of cohesive devices is less sophisticated, relying more on simple connectors like “on the other hand” and “for example.”
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Lexical Resource: The essay uses a mix of simple and more complex vocabulary. While there are some good phrases like “take advantage of” and “bad credit score,” the range is more limited compared to the Band 8-9 essay.
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Grammatical Range and Accuracy: The essay uses a mix of simple and complex sentences with generally good accuracy. However, there’s less variety in sentence structures compared to the higher band essay.
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Development of Ideas: The main points are presented clearly, but the explanations and examples are less detailed and nuanced than in the Band 8-9 essay.
Key Vocabulary to Remember
- Exorbitant (adjective) /ɪɡˈzɔːrbɪtənt/ – unreasonably high (e.g., exorbitant interest rates)
- Predatory (adjective) /ˈpredətɔːri/ – seeking to exploit others (e.g., predatory lending practices)
- Compound interest (noun) /ˌkɒmpaʊnd ˈɪntrəst/ – interest calculated on the initial principal and the accumulated interest
- Financial distress (noun phrase) /faɪˈnænʃəl dɪˈstres/ – a condition of being unable to meet financial obligations
- Opaque (adjective) /əʊˈpeɪk/ – not transparent or easily understood (e.g., opaque loan terms)
- APR (Annual Percentage Rate) (noun) /ˌeɪ piː ˈɑːr/ – the yearly interest rate on a loan, including fees
- Default (verb) /dɪˈfɔːlt/ – fail to repay a loan
- Credit score (noun) /ˈkredɪt skɔːr/ – a number representing a person’s creditworthiness
- Bankruptcy (noun) /ˈbæŋkrəptsi/ – the state of being unable to pay outstanding debts
- Loan shark (noun) /ləʊn ʃɑːk/ – a person who offers loans at extremely high interest rates, typically illegally
Conclusion
The topic of high-interest loans and their impact on borrowers is a complex and relevant issue for IELTS Writing Task 2. It allows candidates to demonstrate their ability to discuss different viewpoints, use appropriate vocabulary, and express their opinions clearly. When practicing this topic, focus on developing well-structured arguments, using a range of vocabulary and grammatical structures, and providing relevant examples to support your points.
For further practice, you might consider writing essays on related topics such as:
- The role of financial education in preventing debt problems
- Government regulations on lending practices
- Alternative solutions for people with poor credit scores
Remember to time yourself (40 minutes for Task 2) and aim for around 250-300 words. Feel free to share your practice essays in the comments section for feedback and discussion. Good luck with your IELTS preparation!
The impact of microfinance on poverty alleviation is another interesting topic related to financial services for low-income individuals. Understanding this concept can provide valuable insights for discussing high-interest loans and their alternatives in IELTS essays.