Predatory lenders–also known as “ loan sharks “–are classified into two groups as you will soon see. This page is broken down into a table of contents so that you can quickly and easily find the information you’re looking for.
Whether you are researching these types of lenders for educational purposes, looking for an alternative loan, or just want information on how to report a loan shark then this site will help you with those needs. We have created a table of contents for you to follow which should help you navigate to the sections most important to you.
Table of Contents
- 1.Definition of a Loan Shark
- 1.1 Types of Predatory Lenders
- 1.2 Reporting Illegal Lenders
- 1.3 How To Avoid Loan Scams
1. Definition of a Loan Shark
The term loan shark sounds scary for good reason. The best advice anyone can give you regarding dealing with predatory lenders is to avoid them at all costs–and instead, follow the tips on this website to find bad credit lenders who are licensed, regulated, and offer manageable interest rates and fees. A loan shark is a sole person, a corporate entity, or a combination of the two. They prey on the financially weak, and offer loans with astronomical interest rates to individuals or businesses, which usually results in the entrapment of this person in a vicious debt cycle. Also called usury, this type of lending is unregulated, illegal and should be reported immediately. Payday lenders, on the other hand, are regulated (to a certain degree) and there are only a handful of lenders worth wasting one’s time on. A person experiencing financial hardship should only consider a payday loan as a last option.
Borrowing from a loan shark (not a payday loan company) is like biting off your own foot. If you have taken out a loan with a this type of lender, then you will most likely deal with:
- Illegal terms
- Forceful individuals
- Nonstop phone calls
- Solicitation to your home or business
- High interest rates
1.1 Types of Predatory Lenders
Payday Loans in the USA
Unbeknownst to many, there are two kinds of loan sharks that lend money to people. In the United States, many people consider payday loan companies–as well as auto title loan operations–a source of predatory lending. Many will argue that, whilst the majority of payday loan company’s abide by the law, they also are notorious for charging outrageous interest rates and have caused many people to become entrapped in a never ending debt cycle. In the United States, the interest rates on cash advance loans average 17% – 25%, plus fees depending on which state you reside in, as each state is regulated differently. Whilst at first glance these numbers may seem manageable, the problem really begins to compound once a person fails to repay the loan within the allotted repayment time. Most payday loan providers require the loan paid in full within 30 days. Each provider’s requirements differ according to the state regulation. This in turn causes borrowers to incur penalties and rollover charges. This is the point where many people find themselves stuck in a vicious debt cycle. You can review the state by state payday loan guide here. The maximum loan amount differs and ranges from $500 up to $2,500, depending on which state you reside in, as well as which lender you work with. The requirements to obtain a payday loan are fairly easy. All that is needed is a valid checking account, a voided check, proof of employment (which is usually your last 2-4 pay-stubs)
Recently, a company by the name of Western Sky, which operates from a territory within an Indian reservation–free from government and financial regulation–lends money up to $10,000.
Payday Loans in the UK
Consumers in the UK, however, have it much worse. Currently, there are no regulations in place to protect consumers who cannot obtain loans from traditional high street banks. This has created an influx of predatory lenders in the UK and caused many people to drown themselves in a river of debt. It’s common to hear of online payday loans sharks in the United Kingdom who charge interest rates as high as 4,000%. Recent attempts to protect consumers in the UK from loan sharks by way of regulation have been met with futility. Should you–or someone you know–become financially desperate in the United Kingdom, it’s important to never panic. Doing so, will put you in a position to accept any ill favored loan brought to your attention. Make informed decisions when it comes to borrowing money–especially in the United Kingdom with the amount of lenders charging insane interest rates and fees.
However, there lives a much more sinister lender among us. The following predatory lender is the type those in financial distress should steer clear from.
Unregulated Loan Sharks: The Dangerous Type
Many will argue that payday loan companies are nothing more than rip offs designed to force the financially weak into a debt well. While this may be true concerning some provider’s, the truth of the matter is that, when it comes down to it, obtaining a loan from a cash advance company can be deemed much safer than borrowing from a REAL loan shark. What separates the two you ask? Well for starters, a legit lender will not do any of the following to enforce repayment:
- Ask to keep your driver’s license or other important identification card.
- Make violent threats against you or your family
- Threaten even higher fees for late payment or failure to pay
- Unprofessional and aggressive type behavior
- Not licensed by a government body or regulated by an accredited financial institution
Whereas a bonafide loan shark will do just about every thing in the above list. Borrowing money from this person (or group) can prove to be disastrous. Never borrow money from this type of lender even if you are at your wit’s end. Do not even consider it as a last resort either. These lenders should be reported immediately without question. In fact, the situation has grown into such a widespread problem in the United Kingdom that an illegal money lending task force has been assigned to eliminate this threat to consumers in financial distress.
1.2 Reporting Illegal Lenders
One thing you can do to see if a lender is licensed is to check yourself. For the most part, lenders will have no problem showing you that they are licensed, such is the case with many cash advance company’s. If you are in the USA, the first place you can check is the Better Business Bureau. The BBB can help you figure out if the lender is really who they say they are. There are also consumer reports available, so you can check to see if anyone else has had bad dealings with a company. In reality, you should always do a general check on a company before you do business with them. This is a standard precautionary. If you find that a lender is practicing without a license and has exhibited signs of usury, then contact the FTC as well.
If you live in the UK, the process to report a loan shark is rather simple. Just go to the Office of Fair Trading and report them immediately.
1.3 How To Avoid Loan Scams
There’s no doubt that you have come across loan scams before. Perhaps you’ve been a victim yourself. The majority of scams that are rampant on the internet these days are not as complex as some would make them out to be. You just need to know what signs to watch out for. The #1 scam that we have noticed here at Loansharkguide.com in our 3 years of running this site goes a little something like this:
- A “lender” contacts you offering a guaranteed low APR loan
- You send in the loan application happily
- You are then told you must pay either an “insurance” fee, or a small percentage of the loan
- You pay the fee and never hear from the “lender” again.
Believe it or not, this happens to desperate people with bad credit loans every single day. The best way to steer clear from this type of loan scam is to know how to spot it. Remember: If a lender ever asks you for a payment upfront, it’s a good indication that it’s a bogus offer. If you send a payment in, you’ll most likely lose your money and fall into an even deeper financial crisis.
If someone requests money from you for a guaranteed loan, it’s a scam. No matter how intriguing the offer or how persuasive the person is, do not risk losing your money. Trust me: they will not approve you for a guaranteed loan.
2. Bad Credit Loan Options
Flexible Payday Loans with Low Interest Rates
Whilst many consumer protection agencies frown upon these lenders, there are a few companies in operation which actually provide a useful service for consumers. If a person requires a short term loan ranging from $500 – $2,500, due diligence must be performed when comparing payday lenders. Finding a company that will offer you the money you need at an acceptable interest rate can prove to be difficult–but not if you know how to find a loan that can benefit you. The first thing you must do when under financial pressure, is to remain calm. Do not make hasty decisions by accepting the first loan offer that comes your way. Instead, compare offers and find the one that makes sense financially for you. This most beneficial type of financial notes are the ones that have flexible repayment terms. Here are some tips to find this sort of lender:
- Flexible repayment terms
- No rollover fees into the following month for non-payment
- Lowest interest rate as possible
- Check if lender has good reviews online
- Ensure lender has a license to lend money
Debt Consolidation Loans
Many people find that consolidating their debt into one single payment often times works for them. There are also a few who argue that, with debt consolidation loans, you end up paying back much more than what you owe so therefore this option should not be explored. Debt consolidation company’s negotiate with your current creditors to cut your bills in half, and pay the bill off completely. You’ll record every single bill you have, hand it over to the company, and they will take care of the rest. This company will then pay off every bill and collection you have accumulated. Therefore, instead of managing and paying multiple bills per month (and often times not paying them), you’ll only have to pay 1 loan or payment per month. The interest rate for this type of financing differs with each lender, so it’s important to shop around if you are interested in this type of financing. While a few people may protest this type of loan, mostly because of high interest rates that go along with it, for many people it becomes an easily manageable vehicle and reduces unwanted financial stress.
2.1 Checking Your Credit Score
While the greater population fails to realize it, you can actually review your credit report for free at http://www.annualcreditreport.com/. The downside to reviewing your credit report with ACR is the service does not tell you your credit score…it only provides you with your credit file history. They will, however, mail you your credit score for a fee. In our opinion, that’s false advertising. On top of that, your credit isn’t even monitored when you pay the fee. That’s why we lean more toward paying a small fee to access your credit history, report, and monitoring from freecreditreport.com You’ll end up paying a fee with either option, with the latter being the best choice.
If you find yourself desperate for a loan, don’t panic just yet. Research your available options and make informed decisions. Don’t fall for loan scams. Never send money upfront for a “guaranteed” loan. Stay away from loan sharks (the dangerous ones). Compare loans from different financial service providers should you opt for a payday or debt consolidation loan.