Loan sharks are people who engage in the business of lending money, often at very short notice but at an extremely high interest and often illegal rate. They are also commonly known as shylocks. They sometimes ask for important documents such as identity cards and passports as guarantee for payment.
Loan sharks are dangerous traders to do business with. This is often a high risk business and loan sharks employ all manner of methods to get their investments going.
Main sources of capital. Loan sharks require a lot of cash to operate their businesses. They have three main sources of capital to keep their businesses afloat. These include banks where they can be able to obtain loans. They also borrow from micro-finance institutions. Apart from these legal sources some are also believed to source funds form illegal sources such as drugs and crime.
Loan sharking borders on crime. The business itself is illegal. Though a loan shark will threaten a borrower with legal action upon default, the truth of the matter is that he has few or no legal options to enforce payment. That is why loan sharks turn to illegal means of getting repayments.one common tactic is surveillance on their clients. Loan sharks keep tabs on their customers to minimize default. This is also a method of creating fear. Another strategy is outright threats on defaulting borrowers .Loan sharks are also known to use violence on defaulting borrowers. They can also take possession of borrowers’ property. Loan sharks also demand ownership documents such as log books and title deeds and can sell a borrower’s property.
Loan sharks engage mainly in a very dishonest business. Often the interest and fees they charge being equal to the amount borrowed. That makes it quite difficult for them to operate within the law inevitably most of their businesses are not registered, they also are forced to practically operate on the streets. It is also very difficult for the law to catch up with them since most borrowers do not report to the police, and in most jurisdictions the illegal lending of money is not really a crime in law.
Loan sharks have very strict collection terms and renegotiation is clearly out of the cards. Often a borrower will be compelled to take a new loan to clear the old one and incur further charges. Loan sharks are also known as predatory lenders since they often take advantage of the circumstances of their customers. Since their business is illegal they advertise very discreetly, preferring posters in the estates and social media platforms where they can avoid the scrutiny by regulatory authorities. The business is a rip-off. Often the smaller the loan the higher the interest rate. Unfortunately the law is not very helpful with laws on illegal lending being mild or vague, and the borrower being required to sue.
Some of the loan sharks will threaten to expose their client’s indebtedness, thus intimidating them into silence.
In conclusion, the loan shark may appear to be a quick fix to financial problems, the borrower should be aware he is trending on dangerous ground payday loans