What is a Loan Shark & How to Spot and Avoid Them
April 16, 2019
Most individuals have heard the horror stories associated with loan sharks and hoped that they never have to experience anything similar themselves. Unfortunately, however, loans sharks may be more common than you think. Each year, countless individuals fall victim to illegal business practices and are scammed by loan sharks. Moreover, they are prevalent across the United States and even in foreign countries.
Read on to learn more about what they are, how to spot them, and how to avoid them when seeking a personal loan.
What is a Loan Shark?
A common misconception is that a loan shark is only a singular individual, however, in some cases, this is a larger entity working in concert together. These individuals will typically prey upon desperate individuals, such as a family in a tough time and will focus on lower socioeconomic neighborhoods. Examples of individuals who may fall prey to a loan shark include those experiencing an unexpected family emergency (such as medical, fire, loss of employment, etc.), or those who think they will be able to pay the money back before the high-interest rate kicks in.
After finding a particular target, a loan shark will typically lure the individual with a loan that might be viewed as a metaphorical lifeline in the face of an emergency. What the victim may not realize is that the loan normally includes small windows of repayment, interest rates often above legal standards, or penalties that are exorbitantly more than the initial funds lent. For example, an individual may borrow $5,000 and not realize that there are stipulations for repayment of $15,000 within 30 days or borrowing. If payment is not made, a loan shark may make threats or resort to violence upon the victim, pressuring them to either borrow more money, or find a way to pay back the exponentially higher amount owed.
What are the Tell-Tale Signs?
Fortunately, there are a number of signs that should send the alarm bells ringing.
- Little to No Application Process
Loan sharks will often offer funds with no mention of an application, paperwork, or even proof of transaction. Many lenders are able to offer quick turnaround, either online or in-person for loans, but you should never enter into a loan agreement without proper paperwork that outlines the terms.
- Won’t Disclose Terms & Conditions of the Loan
When prompted for specifics on the terms of the loan, a loan shark will skirt the question and focus on alternative details, such as their ability to secure the money quickly, or that there is no credit score requirement. Be sure to never accept a loan without detailed information on the lending terms.
- Asks for Collateral
Some loan sharks will insist upon receiving collateral in exchange for the loan. This includes passports, driver’s license, birth certificates, or even valuable such as jewelry and electronics. An accredited lender will never prompt you to furnish personal documents to be used as collateral; these will only be part of the approval process.
- Little Established Information Online
Loan sharks will often meet you in public locations and might not have a formalized address for their business operations. Moreover, there may not be much information found online through a simple Google or Bing search of the loan shark or entity.
- Attempts to Change Previously Agreed Upon Terms
Because there is often a lack of written agreement or proof of proceedings, loan sharks will often change previously agreed upon terms, or backtrack when negotiating terms of a loan in progress.
- Leverages Pressure or Resorts to Violence
Finally, a tell-tale sign of a loan shark is any violence, threats, or even insinuation of possible violence for unpaid loans. In this case, you should trust your gut and never engage in business with an individual who may resort to violence against you.
How to Avoid Loan Sharks
The only certain way to avoid loan sharks is to ensure that you are working with an authorized, accredited lender. Illinois Lending offers legitimate loans with comparably low-interest rates. Request more information today.
One Final Note:
If you or someone you know is ever approached or a victim of illegal loan activity, the Consumer Financial Protection Bureau may be able to help. You can file a report online and help yourself and others alike.