Signs to Tell the Lenders from the Loan Sharks
Loan sharks go by many names. They are often called predatory lenders or underground bunkers. A loan sharks definition has changed little over the decades. All charge very high interest rates and fees. While loan sharks are illegal in all states, options such as payday lenders or short-term lender are legal in some states. Those lenders offer high cost loans to people with bad credit. Most of these loans have no collateral, but some may ask for you for something of value to secure the loan. Payday lenders, auto title lenders and pawn shops all offer loans publicly and are regulated, while loan sharks operate their businesses under disguise. Here a few signs to tell if your loan is reasonable or just another shark loan.
A Loan Sharks Definition: Know the Meaning
While there may be some disagreement around the edges, a loan sharks definition is founded on the idea of lending of money at exorbitant interest rates. The term “exorbitant” gives you an idea of how excessive these unchecked fees can be. With loan sharks you borrow money and only have a small amount of time to pay it back. If you do not, you get charged large fees that can quickly add up to two or three times the amount you already owe.
While loan sharking is illegal. Most bad credit loans are not ideal. So how do you know if lending is real and if it is scamming? There are certain terms that you should look out for as you shop for a loan. First legitimate loans are upfront with terms.
Also See: Licensed Loan Sharks Online
Excessively High Interest Rates
The first obvious sign is the disproportion between the very small loan amount and the very high interest rates. Compare the sharks’ rates with those offered at well-known banks and financial institutions. Look over the terms of loan sharking and see if or how much the rates go up every day, which could be as much as 2% a day. Loan sharks have been now to change thousands of percent on a loan.
Hidden Fees
The mention of hidden fees is not included in the loan shark definition, but you should expect them. Reputable lenders will mention all of their fees and rates. Disreputable lenders will not mention their excessive fees and rates. In fact, most loan sharks do not offer any documentation at all. The terms move and are always in favor of the illegal loan shark.
Vulnerable Customers
Loan sharks are hunters that hunt for vulnerable prey. Loan sharks are looking for desperate borrowers with few legal options. These borrowers are often so desperate they will take on obviously bad term to borrow money. People with bad credit, the elderly and people with low incomes are their main targets. Low-income people are less likely to hire a lawyer and take the lender to court. The potential for threats an intimidation keep those borrowers from going to the police.
Confusing Paperwork
The business of loan sharking, like any unethical business, is designed to trap and confuse its victims. These shark lenders either provide no paperwork or tons of it. The loan shark will give you pages of paperwork that seem to go on endlessly. Of course, you do not want to read through hundreds of pages, so you skip the information and remain uninformed about the lender’s rules. You unknowingly break a rule and tack on one fee and then another. Eventually, you get yourself into more and more debt.
Clever Disguises
Sharks do not pop out and call themselves sharks. They stay under disguise and simply call themselves “lenders.” If they operate illegally, they use threats of violence to remain under disguise. They seem friendly and understanding at first, but once you borrow the money, the facade falls away.
Stay Away and Report Them
Your two main goals are to stay away from these unlicensed and unregulated lenders and report them to authorities. Even if the lenders are legal, you should know the difference between good rates and bad rates. Find the specific agency or office that handles the filing of consumer reports.
Going to a loan shark is not your last resort, it is not an option at all. There are legal options to borrow money (click here). The first step is to stop paying a lender that is not operating legally and go to the police. Loan sharking is never legal, and never a safe option based on the loan sharks definition.