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There are times when people, especially business owners, run out of funds and as a result of their desperation, they end up borrowing money from the wrong set of individuals known as Loan Sharks.

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A loan shark is an unlicensed person or an entity who offers loans illegally and at extremely high interest rates, has strict terms of collection upon failure, and generally operates outside the law. Because loan sharks operate illegally, they do not go through the right process of offering and collecting loans, rather, they often resort to enforcing repayment by blackmail and threats of violence.

In addition, their interest rates are generally well above an established legal rate, and often loan sharks ate members of organized crime syndicates.

How a Loan Shark Works

Because people are always in need of funds at one point or the other, that means loan sharks can be found anywhere. They may be found in under-banked neighborhoods, on the internet, or through personal networks, they might even be members of a professional network. Their funds are usually from unidentified sources, and they work for personal businesses or unregistered entities.

It is important to note that loan sharks are not licensed and operate illegally, therefore, regardless of how desperate you might be or the reason why you need the funds, if you borrow from them, it is likely you’ll:

  • Get a loan on very bad terms
  • Pay a huge rate of interest
  • Be harassed if you get behind with your repayments
  • You will end up paying a much higher level of interest on your loan compared to legal money lenders
  • Be pressured into borrowing more from them to repay one debt with another
  • You might be called upon to repay the debt at any time, using violence as a means of forcing repayment

Loan sharks sometimes frighten people by saying they will be prosecuted and even sent to prison if they do not pay up. However, this is not true because not repaying a loan from  an unlicensed lender isn’t a criminal offence.

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If you need a loan, regardless of how desperate you are or how urgent you need a loan, always go to a licensed lender who will consider lending to you even if your income’s low, your credit rating’s poor or you only need a small amount for a short while.

On the other hand, you can also look into borrowing from a credit union because credit unions encourage you to save what you can and only borrow what you can afford to pay back. Other financial institutions and licensed organizations are places you can run to if you need a loan rather than falling into the hands of loan sharks.

Here are some of the tell-tale signs to look out for that you might be borrowing from a loan shark:

No paperwork: The use of paperwork makes something seem more legitimate and they always serve as a proof to fall back to in time of trouble, that is why loan sharks avoid it at all costs. In the course of their operation, there is often little or no paper work involved and a loan shark may take personal items such as your passport or bank cards by way of ‘security’.

Cash loans or bank transfers: Previously, loan sharks normally prefer to deal in cash. However, more are now using bank transfers as well as a means of transaction.

Refusing to give you information about the loan: Undoubtedly, the source of their funds are unknown, and regardless of how inquisitive you might be, most loan sharks will avoid giving you clear details about your loan, such as the interest rate, details of previous repayments and the total amount you owe.

Taking possessions for security: Some loan sharks will take personal possessions, such as a passport or bank cards, to act as security or collateral for their money.

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This article was first published on 7th April 2022

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Grace Christos Is a content creator with a proven track record of success in content marketing, online reputation management, sales strategy, and so much more.

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