It is believed that more than 3 million adults across the world have borrowed from a loan shark, or illegal money lenders, in the last 3 years. These illegal moneylenders tend to target individuals who might be vulnerable and desperate for money, and who could be dealing with problems in addition to financial troubles.
As most households struggle with the rising cost of living, there is a risk that more individuals are turning to loan sharks and falling into the trap. While it is illegal to lend money without authorization, there is no restriction on borrowing money from loan sharks. Therefore, it is recommended that you be cautious about them and borrow only from reliable financial institutions like Stashfin.
What is a Loan Shark?
Loan sharks are individuals or organizations that lend money illegally without having the proper authorization from relevant authorities. They can serve as organized groups presenting themselves as authorized and reliable lenders or simply someone you can meet in your daily life.
It can be dangerous to borrow from loan sharks. However, identifying one might not always be easy. Some loan sharks are known to be involved in criminal activities, like drug dealing. However, others usually depict a highly legitimate image.
Also referred to as money sharks, these entities are lenders who engage in illegitimate lending practices. They usually offer loans or lend money at higher interest rates without proper documentation. In addition to following an informal application process, they also depict unlawful behavior during the repayment window.
Borrowers easily fall for this trap when they might not have other available options. In case they do not meet the strict eligibility criteria for legitimate lenders, loan sharks appear as the ultimate option, particularly in case of emergencies.
What are the Signs of Loan Sharks?
Some common signs to watch out for are:
- Charging a higher interest rate than other lenders in the existing market
- Marketing related to personal loans without proper paperwork and zero interest rate
- Offering cash loans than bank transfers
- Asking for security higher in value than the given loan amount
- Not possessing any official license
- Not being regulated by the RBI or not following the Digital Lending Guidelines of RBI
- Not providing any relevant loan information, charges, or terms
- Not asking about your credit score or going through your credit report
- Making use of inappropriate techniques to force you into actions while not offering time to consider the offer
- Not featuring a secure app or website
Why are Loan Sharks Dangerous?
To lend money legally in India, lending institutions or lenders are expected to be registered with the RBI or the Reserve Bank of India. This ensures lenders follow specific rules while guaranteeing the safety of borrowers.
Loan sharks are not registered or regulated. This implies that they can function illegally. Unlike registered and authorized lenders, loan sharks are not usually obligated to the industry standards put forth by the RBI. This will eventually affect anyone borrowing from such lenders or institutions.
For instance, loan sharks are typically known to charge higher interest rates while also using violence and threats, particularly when you are not able to repay the amount. Even when you borrow a small amount of money, to begin with, a loan shark might trap you such that you end up losing a significant amount of money.
Some loan sharks are also believed to be involved in specific types of criminal activities. You can come across cases of borrowers who have been forced into dangerous or harmful situations, like drug dealing, to repay the loan amount.
It is quite easy to fall into the trap of loan sharks. Eventually, it can have long-term effects on your finances and other crucial aspects of your life. In case you are struggling with debt or need money instantly, you can always trust reliable providers of small personal loans, like Stashfin.
Top Reasons to Avoid a Loan Shark
During the initial stages, loan sharks might appear quite friendly and supportive. However, dealing with them can lead to dangerous consequences. Some to consider are:
- No option of making a full settlement to avoid higher interest rates
- Total borrowing cost exceeding the borrowed amount by a major margin
- Extremely high interest rates lead to debt accumulation
- Immense pressure to borrow money
- Higher chances of losing collateral
- Exceptionally high hidden fees damage your financial health
- Threats of violence or harassment
Tips to Avoid Loan Sharks
These types of lenders can cause immense stress in your life. Moreover, they can also affect your overall finances, which might take longer to recover. Here are some tips you can consider to avoid these lending scams:
- Go through online reviews about the lenders.
- Conduct in-depth research before you fill-up the loan application or even share your details.
- Make sure that the lender is ensuring ample transparency by specifying all important details on the official website.
- Apply for small personal loans only with reputable and reliable lenders like Stashfin, having proper RBI approval.
- Search for upfront fees.
- Do not reach out to lenders depicting high-pressure sales techniques.
- Avoid giving any lender relevant banking information before you are sure about everything.
- Report the company if you find anything suspicious.
Conclusion
Loan sharks are predatory lenders who exploit vulnerable individuals by charging exorbitant interest rates and fees. They often resort to intimidation and threats to collect debts, making it difficult for victims to escape their clutches.
It’s crucial to be aware of the signs of loan shark activity and seek help from legitimate financial institutions or authorities. By understanding the dangers of loan sharks, individuals can protect themselves from financial exploitation and secure a brighter future.
