If you’re having money troubles or are worried about the state of your finances then you’ve probably looked into getting a loan. If you have then you may have come across the term ‘loan shark’. But what exactly is a loan shark and what do they do? Read on to find more information about them and why they are a bad idea if you’re worried about money.
Loan sharks are illegal lenders who lend money to people who are in need. They tend to target low income and desperate people because they know that these are the people who are more likely to go for their services. Loan sharks often seem friendly and inviting and probably seem like a great idea at first but borrowing money this way rarely turns out well.
But why are they so bad? Loan sharks often come with a lot of high risks when you borrow from them, and these risks can end up costing you a lot. Because loan sharks are illegal they don’t have to operate according to any rules or regulations and this can leave you without any protection. Borrowing from a loan shark often means that you end up paying far more interest than you would be going with a legal and legitimate lending company. For example, one person only borrowed £500 from a loan shark but ended up paying a whopping £88,000 back in total. For those who are already worried about money, this is not going to help the situation. You may also be pressured or coerced into borrowing more money in order to help pay off your current loan. This has led to many people being left with a mountain of debt that they can’t pay off, and are constantly having to borrow to keep up repayments.
Another common risk associated with loan sharks is that you may end up being harassed or threatened if you don’t make payments on time. Because loan sharks operate outside of the law they can decide to change repayment dates, or change the amount that you should be paying each month – without having to inform you. This puts you in a very difficult position as you have no legal backing to protect you if they do decide this. By going to a loan shark you have also participated in something which is illegal and loan sharks often rely on the fact that you won’t go to the police if they start harassing you. Unfortunately, there are all too many cases of people being attacked because of the money that they owed.
If you’re worried about coming across a loan shark while looking for a loan then there are some things that you can do to help you recognise one. A loan shark will often offer little to no paperwork and won’t do proper credit checks beforehand. A legitimate lender will do thorough background checks in order to make sure that you are able to pay back your loan without a massive negative impact on your life. Loan sharks are also likely to withhold information from you such as the amount of interest you’ll pay. They tend to be vague like this because this means they can change the interest rate if they want, and they know you will be more likely to refuse if you knew the truth.
Other techniques that loan sharks use those legitimate lenders don’t are things like taking forms of ID such as driving licences, passports or bank cards. A reputable lender will never, ever ask you to hand over these items. At most they’ll ask for photocopies, but never the actual thing. This is one of the most obvious ways to tell if a lender is a real deal. There is a government organisation that keeps track of all authorised lenders in the country. This is called the Financial Conduct Authority and they have a list of all the people who are allowed to lend money legitimately. You can find this list online so you are able to check beforehand if the lender you have been dealing with are legal or not. It is never a good idea to go for a loan shark, no matter how much trouble you are in. There are always other options and a loan shark shouldn’t be one of them.