Finding the money to deal with unexpected costs in a time where peoples’ financial situations are at their worst is tough. Often, people will undertake desperate measures to make sure that they don’t go without. More and more people are opening themselves up to the dangers of loan sharks and understanding exactly what a loan shark is and does is vitally important to ensure that you don’t get caught out by one yourself.
Loan sharks can be particularly dangerous to borrowers and avoiding them at all costs is the best advice that can be given to you.
What Is A Loan Shark?
A loan shark is considered to be an illegal lender, who targets members of the public who are desperate for loan options. Often, the rate at which you take out a loan with a loan shark is significantly higher than is the case with other, more legitimate lenders and there are a large number of risks attached to borrowing from a loan shark.
In recent times, loan sharks have been known to attempt to charge interest rates at a percentage as high as 719,000%, making them not only illegal but incredibly dangerous and near impossible to pay off. Loan sharks are referred to as such because of their reputation for turning if things don’t go their way.
Loan sharks start out being very friendly lenders, giving you the impression that you have made an informed and financially sound decision. If you find yourself getting behind on your repayments, and this is considerably more likely than would be the case if you borrowed through a conventional lender because of the sky-high interest rates attached to the loan, then loan sharks use unconventional methods of ensuring that they get their money back. They are renowned for harassing or threatening their customers.
Loan sharks also have a reputation for pressuring their customers into borrowing more money as a way of paying off a loan they already have. Debts spiral out of control, and you find yourself in the alarming situation of never being able to repay the loan.
How Can You Spot A Loan Shark Vs A Legitimate Lender?
Loan sharks, of course, operate in different ways but they each use similar methods to attract customers. A loan shark will offer little, or absolutely no, paperwork to their clients and a record of payments won’t be kept. A lot of loan sharks will refuse to give information on the amount of interest that their loan is accruing, as well as increasing the debt or adding additional charges or interest at any given notice.
On the other hand, a legitimate lender will offer a contract and formally disclose all of the information, including how much interest you owe.
Loan sharks are not averse to resorting to violence to get their money back, threatening to have you sent to prison if you don’t pay up. Be aware that this cannot happen as loan sharks are not authorised lenders and have absolutely no legal right to recover the debt. Any loan given by a loan shark is illegal and has no legal standing.
What Are The Alternatives To Loan Sharks?
If you are having money issues and need to borrow a fixed amount of money over a fixed period of time, then there are a number of reputable lenders there for you to approach. Make sure you shop around and try and get the best deal, and the FCA should authorise all legitimate and reputable lenders. Checking their legitimacy is key to ensuring you are borrowing from an authorised and trusted lender.
If you have a poor credit history and would struggle to get a loan from a bank or building society, then there may well be some government benefits that you are entitled to that you are not aware of. On the other hand, if this is not the case and you desperately have a need for money, then you may well be able to apply for a Budgeting Loan from the Social Fund. This loan is interest-free and can help you get back on your feet. If you are ineligible for this loan, then other help may well be available to you from your local authority and getting in touch with them would be your next step.
If you’re struggling to manage your debts and are considering using a loan shark because you can’t acquire the money you need from an alternative source, then there are a number of organisations out there that can offer you free financial advice and can direct you towards a more suitable way of dealing with your debt.