Loan Sharks Explained
Loan sharks are a growing problem, especially in the United States. They take advantage of vulnerable borrowers by providing quick cash with extremely high-interest rates and then use fear tactics to ensure repayment. But what exactly are loan sharks? How do they work and why do they exist? Here we’ll cover not only this but much more you need to be aware of.
We’ll start by looking at the definition of loan sharks and what makes them different from other lenders. So, shark lenders are those offering short-term, high-interest loans with little to no regard for the borrower’s ability to repay. This can lead to a cycle of debt that is difficult to break free from.
The loan shark often operates outside of the law, which makes it difficult for borrowers to seek help when things go wrong.
If you’re considering borrowing from a loan shark, make sure you understand all of the terms and conditions. Be sure to also ask questions if anything is unclear. And most importantly, only borrow an amount that you know you can repay.
In continuation, we will further discuss the various tactics they use to trap borrowers in cycles of debt, as well as the legal consequences of borrowing money from loan shark lenders.
What Exactly Are Loan Sharks?
Loan sharks are people who lend money at extremely high-interest rates, often without following any legal regulations. They’re often willing to lend to people with bad credit or those who can’t get a loan from a traditional lender.
These extremely high fees and interest rates make it difficult for borrowers to repay the loan but many people still decide to do so especially when they are in desperate need of money.
If you’re thinking about borrowing money from a loan shark because you can’t qualify elsewhere, it’s important you take time to understand the ins and outs of the whole process.
By doing so, the chances of paying back much more than you borrowed or putting yourself in financial jeopardy will be much lower.
How Do Loan Sharks Work?
Now that we answered what a loan shark is, let’s take a look at how it works.
Loan sharks typically target people who are in need of quick cash and have few other options for borrowing. They may advertise their services online or in local newspapers, or word-of-mouth may bring borrowers to them.
Once a borrower agrees to take out a loan from a loan shark, they will typically be required to sign over a post-dated check for the full amount of the loan plus interest. The loan shark will then hold onto this check and cash it on the agreed-upon date. This leaves the borrower without the funds to repay the loan and often puts them at risk of bounced checks or late fees from their bank.
To give the borrowed money back, borrowers must either take out another loan (often from another loan shark) or find some other way to come up with the cash. This can start a dangerous cycle of debt that is difficult to break free from.
While we suggest you avoid getting a loan from a loan shark altogether, in case that’s not possible in your case, try to be as aware of their tactics as possible.
Why You Should Avoid Loan Sharks
There are many reasons why you should avoid loan sharks. The first one is that they are illegal moneylenders who often charge extremely high interest in order to secure large profits for themselves.
Shark lenders can be very dangerous, and their activities can lead to violence and other criminal activity. If you need a loan, it is best to avoid loan sharks and seek out a reputable lender. Even if your score is in a poor range, there may still be some lenders willing to work with you, if you just dedicate some time to finding them.
Loan sharks do not follow any of the laws and regulations that protect consumers from unfair practices. They are also renowned for making threats when borrowers cannot make payments.
In addition, loan sharks target people who have bad credit or no credit history, leaving them vulnerable to high-interest rates and difficult payment terms. You should never get head over heels if some lender is desperate to lend money to you or just trying to pass this whole thing as if they are doing you a big favor that you just cannot decline.
If getting a loan from a loan shark is your last resort and only option, there are ways to be smart about it. Take a look at your monthly budget and after you factor in all of the necessary expenses, is there any money left for the loan repayment? One other thing you can try to do is negotiate with a loan shark. Remember that their end goal is to lend you money so they may be open to lowering their interest rates a bit.
How to Avoid Loan Sharks
There are a few things you can do to avoid loan sharks. First, be aware of what they are and how they work. So, anytime a lender is trying to lend you money at extremely high-interest rates and operating without proper licenses you can at least suspect they are shark lenders.
Second, don’t borrow money from someone you don’t know or trust. If you’re in a bind and need cash, go to a reputable source like a bank or credit union as there is still a chance of finding a lender that specializes in lending money to individuals with bad credit.
Third, be careful of online lenders. Many of these companies are legitimate, but there are some that are not. Be sure to research any company or individual before you borrow from them.
Fourth, if you’re contacted by a loan shark, don’t engage with them. Just hang up the phone or delete the email. Don’t give them any information about yourself or your finances.
What to Do If You Owe Loan Shark Money?
Someone who has taken out a loan from a loan shark may be paying back up to 10 times the amount that was originally borrowed. This can make it very difficult to repay the debt, especially if you are on a low income.
So, if you owe money to a loan shark, the first step you should take is to try and repay the debt as soon as possible. And in case you cannot do that, you should contact the police or your local Trading Standards office.
Remember that loan sharks are illegal moneylenders and they often will start to threaten you or your family once you are late with the payments. They may also damage your property or even try to hurt you physically. This surely is a matter that should be taken seriously, so don’t hesitate and contact local authorities immediately. You can also call the 24-hour National Loan Shark Helpline on 0300 555 2222 for advice and support.
Loan sharks are an unfortunate reality of the modern world, and it’s important to understand what they mean, how they work, and why you should stay away from them.
It’s also crucial to remember that they can be dangerous and not stop on just the threats if you have trouble paying them back. There are ways out of the difficult financial situation and you don’t have to resort to loan sharks when you can get help elsewhere.
Always do your research before committing to any type of loan or borrowing agreement so that you know exactly what kind of risks you’re taking on. Also, make sure you are getting fair rates and not getting targeted by a shark lender.