Nowadays (especially in pandemic times), we look for lenders everywhere. Sometimes we want to pay off our debts quickly or get out of some financial trouble we have. To do so, we look for licensed moneylenders. The reason is they do not require any major requirements. At the same time, they can lend us at a very attractive interest rate without waiting. In this guide, I will discuss how to deal with loan sharks and all other information about loan sharks.
But you must be aware of this situation. Several consultants and financial experts recommend not taking loans from a money lender. But Why! Because you do not have any legal support in case of any problem. At the same time, they are not reliable.
In many cases, these illegal lenders engage in illegal techniques when they feel you are getting late with payments. That’s why they always charge much higher interest rates as high as 719,000% than other lenders. As a fact, they operate in places where there are normally no banks operating.
Also, they work mostly through social networks to offer their “services.” Avoid these lenders. The sources of financing also come from dubious sources. However, people look for them because they don’t ask for much documentation.
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As a consequence, you can get into trouble with them quickly if you don’t pay. For all this, we will show you how to deal with loan sharks and the most basic knowledge about this topic. So, you can make a better decision if you find yourself in this situation.
How to Deal with Loan Sharks
Loan sharks work similarly, but the regulations worldwide are different. In other words, these types of lenders are the same in their operating system. However, you must know that they have different treatment depending on the country.
For example, in the United Kingdom, there is an institution called the Financial Conduct Authority (FCA). On the other hand, there is no clear frame of reference in the US. So, avoid uncomfortable situations.
Currently, the term shark lending includes predatory lenders, such as subprime lenders. Subprime lenders offer mortgages to homeowners who lack a down payment, have bad credit, or do not meet typical lenders’ other requirements. Subprime lenders are legal (technically speaking).
They lend money at the highest possible legal interest rate. Subprime lenders’ rise their popularity the bank bailout passed by Congress in the US in 2008. If you get involved in a situation with a loan shark, you can do this to avoid trouble:
Avoid being a co-signer on any loan
Don’t be a guarantor for someone else’s loan. Avoid helping this type of lending proliferation.
Avoid giving your credit card information to strangers
This is a very common practice of loan sharks. They dedicate to extracting credit card data to get money and lend it to others. They lend money easily because they know they can push the victims anytime to pay. Even worse, they charge the highest rates ever! (That’s why they don’t ask for much documentation).
To give you an idea, a loan shark can get (annually) up to 400% interest on the money they lend. They use something they call payday loans. These types of personal loans are made based on the amount of the client’s income.
So, the point is that payday lenders lend them money at very high-interest rates. They use to steal credit card numbers to get money from it and lend it later to someone.
Seek a financial advisor first
A financial advisor will give you the options how you have to get a loan. Remember that a loan shark gets more complicated as time goes by. We will look at these options later.
What to Do If You Already borrowed money and They Threaten you to Pay
They use this modality (threats) a lot to get people to pay them. Remember that there is no legal framework in place to force you to pay. If you receive threats, you can call the police. The best way to avoid a bad time is never to try to make money from these types of people or “companies.”
Read More: Guaranteed Payday Loan No Third Party
Ways of Borrowing Money
There are several ways to access a loan other than through a bank or loan shark. Therefore, we mention the most important ones. It would help if you also remembered that you could consult with a financial advisor about each of these ways:
In this type of organization, you must join (as a member) to enjoy its benefits. They work both for credit and savings (as banks). The thing is you get the money quickly. Where the money comes from? Other member’s savings (they lend your savings too, that’s why they work as Unions).
The conditions to access money are few ones, and the interest rates are very good. So, the idea is that these loans are not for large amounts. Why! The reason is it is the best way to be able to lend money to all members. Many people use Credit Unions for savings.
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Peer-to-peer (P2P) lending
You may also hear them called crowd lending or social lending. This method works when you lend money to each other but without financial intermediaries. In this type of lending, both the lender and the borrower agree on each other’s interest rates. Its operation and execution are through an online peer-to-peer platform.
The important thing in this type of loan is to consult with your financial advisor to know all the fees involved in this type of transaction.
This type of plan has a huge benefit for you. You can get a stimulating interest rate. Remember that it all relates to your own money (what you have in your retirement plan). It’s kind of like paying interest to yourself, but you have to always keep up with the payments. Remember that the IRS is watching and can lower your credit profile.
Remember that you lose total interest with tax-free interest when you withdraw money from your retirement plan. Most plans contain a provision that prohibits you from making additional contributions until the loan balance returns into your account. All of these things can harm the growth of your savings.
Therefore, borrowing money from your 401(k) is generally considered a last resort. It’s certainly not an easy loan to take, but it’s there available to you.
These types of lenders are in the business of borrowing money for you. This type of loan’s relevance is that they grant loans to buy high-value goods or services such as cars or medical expenses.
Another particularity is that these types of loans are possible on a short-term loan basis. You can get a great interest rate, but remember that everything depends on your credit history.
You need to know that finance companies are licensed and regulated in the state they operate in. This means that this legal figure has fewer regulations and has more freedom to adjust their rates and terms with you.
Now that you know these figures, let’s look at more terms and general knowledge about loan sharks. Get deep into these businesses.
Personal Independence Payment
As you already know, the Personal Independence Payment is a type of loan that can get you out of trouble. These are very useful, especially if you have health problems or need to buy some high-value asset. The important thing about this is that it doesn’t matter if you have a national insurance affiliation with your job to qualify for PIP.
These types of loans are also possible for emergencies. It all depends on your eligibility within the system.
Loan Sharks and the Law
The UK case is very different from the US case. The Singapore case is very different from the Spanish case. So be aware of that. There are certain limitations and details to consider before taking money from a loan shark.
The best thing to do is always to get advice from your financial advisor. So, that he/she knows the full scope that this type of financial operations has for you. We know that this quick loan type is very feasible for people due to the little paperwork you need to access the loans. However, you have to see everything in more detail.
For all this, you know if your country has a regulation for loan sharks. If so, check about the loan’s terms. Pay attention to the interest rate. This can be very important when it comes to paying loan rates. You should also remember a payment to the day modality that uses quite a high interest rate and does not benefit you.
If you have any problem with this type of lenders, do not hesitate to call the police. Defend yourself from loan sharks. Remember that in some cases, this type of people can adopt aggressive behavior. Avoid being the object of personal threats or threats against your family by loan sharks.
Loan Shark Debt
Avoid this type of uncomfortable situations for you and your family:
Do not give in to the loan shark’s demands
It is very important to keep in mind that this type of person can be very violent and rude. You have the authorities on your side. There is a lot of financial advice available too. It is important not to give in to the pressures of this type of people. For example, the United Kingdom, they do have a legal framework.
However, direct contact lines from the authorities can prevent harassment from this type of person. The best thing to avoid all that kind of thing is not to borrow from these people. Use the other options you read above.
You must pay attention to all the alerts
Usually, a lender of this type can use advertising tactics to seem legitimate (mostly outside the UK). You have to be very careful and watch out for all the warning signs. One of these signs is if they want to charge you a fee before giving you the loan.
This would be a big red flag. Another red flag is not receiving a copy of the contract from the lender. Alternative red flag is when you receive threats from the lender and groups of up to 5 people simultaneously.
Finally, you need to keep an eye on your assets and see if your property has been vandalized or seized. Remember that there are authorities that can stop this kind of people. They can give you support. So, you will always know what to do in each case.
Borrowing from friends or family
It all depends on your current situation. If you can borrow money from someone you know, that is also a good option. However, you can agree on interest rates and repayment terms with that person.
Many people resort to this type of loan because they have that payment culture in their daily practice. All this gives you a more than important guarantee before the lender. Moreover, you can also receive advice from Illegal Money Lending Team. They will advise you perfectly on handling Illegal Money Lending.
Avoid being a loan victim of illegal money lenders. Look for the best option for you, like the ones at the beginning of this article.
Frequently Asked Questions
What happens if you don’t pay a loan shark?
They will seek to threaten you, but technically nothing happens. This type of loan is a kind of felony act. Therefore, there is no legal basis to act against you and vice versa. Take care of your family’s physical and psychological integrity and yourself. Get legal loans instead.
Is it illegal to borrow from a loan shark?
Yes (at least technically). There are other ways to obtain loans without so much paperwork. Remember to get financial advice before considering being part of this type of operation.
Can you report a loan shark to the police?
You can call the police; you can protect yourself from these types of people. There are many stories on the internet where people run away from these types of loan sharks. Therefore, the best advice is not to take loans from them. If you feel any threat, you can call the police.
What are examples of famous loan sharks?
In previous decades, different mafias worked with this kind of loan modality. Thus, the Chinese mafia, the Italian mafia, and different mafias operated loan shark’s networks worldwide. Now, if you want to know some famous people in this field, we will leave you with a couple of them:
- Frank Calabrese Sr.
- Vincent Dominic “Jimmy” Caci
- Anthony Salerno
- Nicky Licata
Why is being a loan shark illegal?
Loan sharks do not have the financial backing. That is to say that they cannot prove where they get the funds to grant loans to their borrowers. At the same time, they do not register with a financial institution in the United States or any other country. Next, these types of institutions are illegal because their origin is fuzzy. Their management is fuzzy.
Can you sue a loan shark?
You cannot bring a lawsuit against these people. Remember that they have no legal reach at the law’s eye. In the case of the United Kingdom, there are some authorizations on some institutions. Still, they also have their regulatory framework that you can go to if you have any problems.
Where do loan sharks get their money?
As is the previous question, the money with which this type of person operates comes from dubious sources. That is why they do not obtain the necessary permits to be able to lend legally.
How can you tell a loan shark?
You can know if they are loan sharks if they do what it is above in this article is. For example, if they cannot explain where the funds come from, they also do not want to give a copy of the loan agreement.
What does a loan shark charge?
Charges vary. They depend on the practices of each loan shark. However, they usually get up to 400% of the original amount they lend you. This is because of the “risk” they take by lending you money without financial collateral.
What type of crime is loan sharking?
It is a type of usury felony according to American law. However, you cannot sue because they have no legal basis. However, it is usury because it violates the interest rate agreements of the national banking system. It’s different in the UK. You have de FCA’s terms there.
Where can I borrow money fast?
There are many options, such as 401(k) funds and credit unions. You can also agree with a family member or friend and sign an agreement with a copy for each party.
What happens if you don’t pay back a loan shark?
Nothing! What you have to take care of is your physical integrity and your family members as well. Call the authorities; change your phone number and emails. Remember that history considers loan sharks as part of criminal organizations. Avoid being victims of loans.
How do loan sharks calculate interest?
The compound interest formula is P (1 + r) ^ n, where P is the principal, r is the interest rate, and n is the number of periods. The interest rate is 15%, and the term is biweekly.
Let’s see an example: A year has 52 weeks, so there are 26 “biweekly” periods. The interest calculation was 15 * 26 = 390%, i.e., approximately 400%. This corresponds to an interest rate of 400 USD per 100 USD in one year.
Avoid having problems with loan sharks. There are options online and also in different parts of any town or city in the world. Seek better financial advice so you can have a better scenario and know what to do. Be smart about borrowing money.
I am Lavinia by name and a financial expert with a degree in finance from the University of Chicago. In my blog, I help people to educate by making wise choices regarding personal investment, basic banking, credit and debit card, business education, real estate, insurance, expenditures, etc.