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.
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.