A loan shark is a person who lets other people borrow money from him through private methods. There are a lot of people who think that a loan shark is always doing illegal practices. However, this thinking is not correct because there are private individuals who can let other people borrow money from them without ever disobeying laws. So, in order to know the good from the bad loan sharks, here are some ways on how to identify illegal loan sharks.
Step 1 in Identifying Illegal Loan Sharks
First of all, you have to know that there are some States that don’t have rate ceilings. There are some places wherein they can charge a borrower with any rate they want. However, some States issue a certain interest rate for all lenders. For example, if a State only allows up to 25 percent interest rate but a lender charges more than that rate, then it can be identified as loan sharking.
Another way on how to identify illegal loan sharks is to look after the penalties that lenders charge to borrowers. Some lenders or loan sharks charge 30 percent for making late payments. This penalty can be charged to the borrowers despite the laws passed in a certain State. So when you are charged with overly high penalties, this can also be considered as loan sharking.
Step 2 in Identifying Illegal Loan Sharks
Another method on how to identify illegal loan sharks is to understand that they can offer payday loans. These people or companies offer people the opportunity to borrow money to be paid on their next payday. It’s like an advance on their salary. This loan can be obtained with a few requirements and without credit checking. The borrower is then given from 2 weeks to 2 months to repay the loan along with a very high interest rate. Again, this is another form of loan sharking. When going for payday loans, be aware about the penalties and interest rates of the lenders before signing into their contract.
You should also know that payday loan companies and services are already being controlled in many places and there are States that prohibit overly high interest rates. However, there are still reports on other lenders that gave interests as high as 700% and even more on small loan amounts. Payday loan companies have tried to defend their very high interest rates saying that they can provide service that cannot be given by conventional banks or lenders. However, it should still be noted that payday loan companies also provides short-term repayment methods unlike conventional banks and therefore should not impose high interest rates.
All legal lenders operating a business such as lending should run on an appropriate license or permit. These lending businesses also follow a regulated set of rules on lending practices. If a person or a business is operating without a permit or license then it must be illegal and practicing loan sharking.
What To Do Next
If you are in need of financial assistance, you should know how to look for legitimate lenders. Aside from the correct permit or license, a legal lender also charges the appropriate rate of interest and must not charge exorbitant penalties.