5 Signs You Are Dealing With Loan Sharks

When the walls start closing in, and there is nowhere to turn, you increasingly see friendly faces offering you a way out, touting ‘instant approvals,’ ‘no job or income requirements,’ and even ‘no credit check.’

It may be tempting to give in and make all your problems go away, albeit temporarily, but make no mistake. Getting involved with loan sharks is akin to selling your soul to the devil – the financial scams are always back with new twists. Loan sharks have been around for as long as commerce itself, preying on the desperate with easy access to money, charging exorbitant rates, and using evil means for debt recovery.

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Despite being outlawed in numerous jurisdictions, the practice continues unabated. If you’re still tempted to give them a try, here are five spine-chilling reasons why you must avoid them like the plague!

**Before we get into the signs of a loan shark, if you are looking for legitimate loan offering platforms you can check out the Scam Detector's verified partners: Lending For Bad Credit, Life Loans and LoanMax. Try them and let us know if they are still awesome and trustworthy..

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1. Never-Ending Interest Rates

The biggest threat of working with loan sharks is the never-ending interest rates or the lack of transparency regarding interest rates.
In countries and jurisdictions with no caps, interest rates can go up to 600%, which will continue to be charged on the outstanding balance until you can pay back the amount in full.

By some estimates, close to 76% of new loans availed from unregulated loan sharks are used to clear existing debt with other similar lenders.

2. High Penalties & Fees

The price of dealing with loan sharks doesn’t end with high-interest rates. Most lenders have a range of other fees, and penalties levied for even minor infractions.

If you thought banks are shady about the fine print, loan sharks and payday lenders often give them a run for their money. Being unregulated and not bound by any laws, they can get away with charges to any extent with no repercussions.

3. Short Repayment Terms

Unlike banks and financial institutions, loan sharks lack a significant source of liquidity to offer long-term advances. Hence, most loans they make are for short periods, resulting in additional stress for borrowers.

Payday loans have an average term of just two weeks, which most borrowers fail to meet, following which they have an option to pay a fee to have the loan rollover for another two weeks. Since most borrowers take up to a year to pay off their loans, the fees themselves can be considerable.

4. Aggressive Debt Recovery Practices

Predatory lending was historically the purview of organized crime syndicates, with threats and muscle power often used to enforce recoveries.

Even without resorting to outright violence, loan sharks are known for other means of harassment, such as arriving at your doorstep or place of work to intimidate you, calling you in the middle of the night, and more.

With lenders themselves seeing default rates as high as 20% to 30%, they usually go all-in to recover their dues, resulting in aggressive practices.

5. Legitimate Alternatives

In a mature financial marketplace, there are no reasons for borrowers to deal with the likes of loan sharks. With plenty of regulated, legitimate lenders and alternative sources of credit, the only reason someone might still consider a loan shark is the ease of approval and disbursement.

Given their predatory marketing campaigns, often on ‘Quick Cash,’ ‘Instant Loans,’ and ‘Get A Loan In 5 Minutes – Guaranteed Approval!’, it is easy to get drawn in. However, borrowers must consider what they stand to lose once they get caught.

Off-late, students have become a key target for this industry, often a result of their naivety and inexperience. The only solution is awareness and more outreach from legitimate student lenders and financial institutions.

Loan sharks and payday loans are vicious cycles in which borrowers get trapped with no recourse.

It is referred to as ‘Predatory Lending’ for a reason; most borrowers who get caught continue paying off interest for several years before getting free.

Find Out If A Loan Website Is Suspicious

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How To Report Loan Scams

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How To Protect Yourself More

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Meanwhile, educate yourself with some other financial fraud right under this paragraph, so that you know how to stay safe online. Last but not least, feel free to use the comments section below to expose other loan scammers.

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