What you should know before taking money from a loan shark

A loan shark always seems like the best option you have when in a crisis. In most cases your budget is overstretched, the daily expenses are killing you, your emergency fund has run out and worst of all you don’t want to be a burden to your family and friends.

When you first meet loan sharks, they are always accommodating and will empathize with your situation. They will gain your trust and you will feel like you have a confidant, someone with whom you can share your problems and before you realize you are in deep borrowing money from them. Which they will abundantly offer you.

A loan shark will seem like the solution to all your problems until the friendship is severed with delays and unfavourable payment terms. Before getting into an entanglement, here are things you should know about loan sharks first:

Lack of a contract

In most cases a loan shark will want you to believe they want to help. A written contract will be the last thing they will want you to have because this will bind them as much as it will bind you. They don’t want you knowing their terms of work because they don’t have any and they will want to twist your arm.

When you want to borrow money from someone who isn’t your friend, best you ask for a contract in case the going gets tough and you will need legal representation. When it comes to loan sharks, a witness is not enough to save you from what’s to come.

No loan limit

Even banks have loan limits, yet they are certified lenders. With loan sharks, they are like Johnny Cash they will dish out as much as you want with no questions asked. When someone isn’t worried about giving large sums of money to a total stranger, this should be a red flag.

Loan sharks will want to have you in their corner and the more money they lend you, the more they will make it impossible for you to pay it back in one go and that’s where your problems will begin.

Steep interest rates

As mentioned before, a loan shark will not want you to know their terms of business before you have used the money or lent you a large sum. In most cases they will come after they are sure you found them useful and then they strike.

They will stipulate a high interest rate that is often unmanageable and far much higher than what street lenders or your friends will ever charge you. In most cases their interest rates stay fixed whether you have paid a chunk of the loan or not and this could go for months.

Threats and harassment

Loan sharks are known for threatening and harassing people when they fall behind on payments. At first it will seem like a reminder, until they start picking stuff from your house as security when you default. In most cases you will find yourself only paying the monthly interest because it is what you will be able to afford at the time and before you realize it you are deep in debt.

You might even come down under pressure and borrow a loan from another lender to offset your original loan with a loan shark. This will only confirm how much power they have over you and they could easily change their terms of payment, because they don’t have any.

Tip: Loan sharks are rarely known by the public and will often want to keep it that way. You will know them through a friend who perhaps knows a friend and this loop could go on and on but you will never really know who they are or what you are dealing with. But when the deal is too good to be true, run.