A loan shark is an unregulated moneylender who frequently preys on low-income families or people who are going through a difficult period. You should be aware that licensed moneylenders are subject to Financial Conduct Authority (FCA) regulation and are required to abide by the FCA’s norms of conduct.
It can be risky to borrow money from a loan shark, but it’s not always easy to detect one. For instance, a loan shark might be a buddy who at first seems kind and friendly, hypnotizing you into a mistaken feeling of safety before changing their tone to one that is more menacing and dangerous.
Loan sharks don’t have licenses and break the law. If you borrow money from them, you probably will:
- Obtain a loan with terrible terms.
- Pay an astronomical interest rate; face harassment if you fall behind on your payments;
- Feel encouraged to take up further loans from them to pay off one debt with another.
How to spot a loan shark?
Most loan sharks cover their fraud to appear real
However, the tricks below will enable you to spot them easily.
- You were given a loan in cash.
Although loan sharks often trade in cash, you should be aware that they could also be active online.
- A lack of documentation
You will receive the relevant documentation outlining the loan terms from all legitimate lenders. Loan sharks won’t provide you with a written contract.
- A lack of precise loan information, like the interest rate as well as terms of repayment. When it comes to the interest rate and the precise date the loan would be repaid, loan sharks may be tricky.
- Loans made without checks.
Loan sharks won’t perform credit checks or budget analyses, in contrast to authorized lenders.
How do I stay away from loan sharks?
Always see a licensed lender if you require a loan. Even if you have bad credit, a low income, or a short-term loan requirement, some legitimate lenders might still explore lending to you.
The Consumer Credit Act will protect your loan arrangement, even if you could still have to pay a high-interest rate. Always compare offers when seeking loans, though, as just because a lender is authorized doesn’t mean you are automatically getting a decent price.
Consider borrowing from a credit union if you have a low income and need a quick loan for a small sum. Credit unions advise members to save as much as they can and to take out loans that they can afford to repay. The maximum interest rate you’ll pay is 1% each month, meaning the interest on a £100 loan won’t be more than £1 per month.
