Loan sharks, or predatory lenders, are lenders who lend money to borrowers with bad credit who otherwise would not be able to qualify for a traditional loan. In many cases, such lenders charge extortionate interest rates that cause such borrowers to plunge even deeper into debt. Borrowers with bad credit profiles that otherwise cannot qualify for acceptable loan rates often times have trouble discerning between legal lending institutions and illegal money lenders. The result of making bad borrowing decisions can often times lead to severe consequences…such as never ending debt, harassment, violence, and even death. Despite this, many consumers take such risk because:
b) Consumers do know the difference, however gaining access to funds now to “cure” their temporary financial emergency is higher on the priority list than future problems that may arise from such hasty decisions.
Here is a list of “loan shark warning signs”…and what you as a consumer must watch out for when shopping for a bad credit loan.
Many will argue that such lending practices offer a tremendous value to borrowers who otherwise cannot qualify for traditional loans. In fact, without such lenders in place, many borrowers would have nowhere to turn as claimed by many in the industry. Groups on the opposite side of the fence believe this to be untrue, as there are many alternatives available without resulting to illegal money lenders or high risk legal loans. Regardless, here are 10 warning signs to beware of when researching bad credit loan options.
Higher Interest Rates
The second thing to know about these sharks is that they offer loans of modest amounts. Because they provide smaller loans as compared to regular financing institutions, their interest rates are a lot higher which is comparable to credit cards that have high interests. These rates can go up to 1.5% daily. They also include other fees they can think of.
The third thing to know about these lenders is they do not openly promote their high fees and rates. They shall inform you of such payments once you are in dire need of money and are left with no choice. Their goal is to make people go to them first prior to knowing the interest rates.
Why They Are Sharks
Know that the term “shark” was given to such people due to the fact that they prey on persons who are financially weak. People with low income, senior citizens, minorities and those with very bad credit are their target. There are those who operate in expensive neighborhoods so as to be less noticeable while there are those that setup shops in places with tough economic situations.
Lots of Paperwork!
Loan sharks giving borrowers plenty of paperwork to read is the fifth thing to be aware of regarding such lenders. The terms in such paperwork are often confusing, overwhelming and ambiguous. Those who usually avail of these loans are people who do not have enough money to hire a lawyer to go over these documents thus they would not be able to fully comprehend what they are agreeing to. The contracts may look legal and official but the terms inside can be unlawful and violate the rights of the borrowers.
Avoid Loan Sharks
The sixth important thing to bear in mind is to stay away from these types of lenders. You should research about their background, licenses and the interest rates they demand. If the rates are exorbitant, if the lenders require you to pay weekly, and if they cannot present accreditation from the government, then you are possibly dealing with sharks.
Report to Authorities
If you find out that you borrowed money from sharks operating illegally, you should be aware of the need to report this to the authorities as soon as possible. Look for the proper state office where you shall file your report if you are in the United States. There are different agencies both in the state and federal levels that regulate lending thus you need to know the appropriate office for filing. If you are in the UK, you need to go to the local office on Trading Standards so as to file your report.
The eighth thing to know if your loan is from a shark is to stop paying because the lender you dealt with is unlicensed, thus he is unauthorized to lend money. This stops you from repaying your loan as you have no legal obligation to deal with an illegal entity.
Be reminded that such illegal lenders utilize deliberate intimidation methods for you to pay your loan. They may make threats to physically hurt you if you do not pay the full amount. They may even threaten to get your property or personal belongings. The only way to solve this is to be aware of laws regarding these types of lenders and to let them know that you are aware. You should seek legal or financial advice if you do owe money from these kinds of lenders.
Seek Police Assistance
If loan sharks online continuously harass or threaten you, report this to the police. Be informed that you should record threats made, language used, and the time and the location when and where you were threatened. You should document actions made against you, especially those that violate or physically harm you, and then present this to the police. You may also need police protection if the threats get worse.
Disguising as Lenders
The eleventh thing to be aware of is that there are sharks that disguise themselves to be loan providers with higher interest rates due to minimal or no documents required. They charge exorbitant interest rates of up to 400% and additional fees and do not utilize intimidation tactics. There are also lenders that require car title loans for them to lend money to borrowers and they too have high interest rates.
Sharks on the Internet
The twelfth thing to know about sharks is that there are plenty of them online because they can camouflage themselves well with the absence of brick-and-mortar stores. Their reputation can be checked however from the website of the Better Business Bureau and from online reviews and testimonies.
If you need money, do not borrow from loan sharks online to avoid payment of high interest rates and fees, and instead borrow from your family or friends, or from your employer in the form of a salary loan. You can also look for payday loans offered by legitimate lenders.