First of all, what is a loan shark anyway? A loan shark is an economic entity that grants loans with poor credit ratings. A loan is usually granted under disadvantageous credit conditions. In most cases, loan sharks charge very high interest on the approved loan amount.
Both natural and legal persons can act as loan sharks.
When is a loan shark found?
A loan shark is usually selected when normal credit institutions no longer want or cannot grant loans to the debtors. A loan can be refused for a number of reasons. These reasons include, for example, the poor creditworthiness of a debtor. The loan shark promises the debtors a quick and secure payment of a loan even with poor creditworthiness.
In addition, a loan shark is sought when consumers definitely want to bypass and refuse to apply for a loan from a bank. A debtor with poor creditworthiness poses an increased risk to banks because credit institutions have to assume that the approved loan amount cannot be repaid in full.
A loan shark is usually aware of the bad prospects of debtors and takes advantage of the situation of consumers with poor credit ratings. In many cases, the loan sharks charge very high interest on the approved loan and like to exceed the usual limits of usury interest.
What methods does an interest shark work with?
An interest shark not only charged borrowers very high interest rates, but also uses other, questionable methods. First, the requested amount is granted and paid to customers with poor credit ratings. A loan shark knows from the start that these debtors are unlikely to be able to repay the loan.
The lender does not have a banking supervisory license and acts in an illegal manner. A loan shark pursues different goals than normal credit institutions and wants to earn a lot of money, in particular by claiming excessive interest. In addition, the loan sharks use various methods to suppress and unsettle consumers.
They are also happy to bill the debtors for financing costs, commissions, processing fees and other services. Most debtors not only have to pay off the full amount of the loan, they also have to deal with excessive bills, interest, processing fees, commissions and insurance. If the debtors are unable to repay the loan amount together with the high interest rates, a loan shark very quickly turns on a debt collection agency.
The collection agency is also activated if the borrower is at risk of default. In order for the loan shark to finally get its money, questionable methods from the collection agency are used. In extreme cases, debtors are threatened, intimidated and unsettled by money collectors. Such methods also often lead to a very bad reputation – even if they don’t act that way.
What types of loan sharks are there?
Consumers should always be well informed when trying to take out a loan. Possible loan sharks should definitely be avoided. Both private individuals and companies can act as loan sharks.
Loan sharks have specialized in low-income customers with poor credit ratings and take advantage of the plight of consumers. In addition, they also use ignorant and inexperienced people who want to apply for a loan.
Some loan sharks are called financial brokers or credit intermediaries. In many cases, these credit intermediaries are providers who approve and issue small loans with excessive interest.
How can you prevent getting a loan shark?
Consumers should definitely choose and pay for a reputable financial broker or credit broker with great care. Some private loans are also given by camouflaged loan sharks. A loan shark always demands excessive interest and issues questionable conditions for the loan.
It is therefore important to check a few things in advance before taking out a loan:
- Is there a contract or is it a purely verbal agreement? What are the general conditions, what happens when there is an acute shortage of money if you cannot repay a current rate?
- Does the provider have a website with a legally watertight imprint? Does the website look trustworthy overall?
- Are there any testimonials?
- Is it possible to use an alternative source of money?