During financial difficulties, we look for options that would help us with no further trouble. If our families and friends can’t help, there are also moneylenders. However, there are also so-called loan sharks waiting to prey on unsuspecting borrowers. They are the kind of moneylenders who charge extremely high rates of interest and typically under illegal conditions.
How will you identify if they are loan sharks or not? Here are ways on how to figure it out.
1. Loan interest rates
People resort to loan application so they can settle financial needs accordingly, whether for business, medical emergencies and the likes. However, there are lenders who approve loans quickly but with a high interest rate. Avoid lenders who offer this and choose those who have reasonable interest rates.
In addition to this, ask your lender for credit agreement or quote before you actually apply for a loan. Legitimate moneylenders have loan calculators that you can use before applying for a loan.
2. Required documents
Lenders always require documents to be submitted for them to check if you are qualified. There is essential information needed to let them know if you can settle the payment on time. But loan sharks will not ask for this, their priority is to provide the cash you need regardless of your ability to settle on time. If the repayment is not done, there will be a big chance that you’ll be caught in snowballing debt.
3. Loan contract
There are loan sharks who do not provide loan contract yet there are some who do. However, you should be very careful about this. Before you sign, be sure that you have read all that is written in the contract and have understood it clearly. If there seems to be a discrepancy or vague statements, do not hesitate to ask the lender. Always have a clear and safe negotiation.
4. Uses ATM cards and legal documents as collateral
When dealing with legit lenders, they will only require certain documents and information for the process to begin. But with the loan sharks, they will ask for items such as personal documents, government-issued IDs and even ATM cards. To have the assurance that you will pay your dues on time, they will use these items as collateral. Do not engage with this for it may be used for illegal purposes. Be vigilant.
5. Clear terms and conditions
During the repayment schedule, there should be a fixed arrangement wherein both the lender and the client agreed. This is to assure both parties that the repayment schemes will be followed accordingly. Loan sharks will guarantee any payment schedule can be used but later become a nuisance during collection. In addition to this, they may increase the debt or have additional charges at any time. They will use any excuse to charge you more. On the other hand, legal lenders are transparent from the moment they give a quotation up to collecting your payment.
Being aware of how the loan sharks work, you now have an idea on how to differentiate them from the real ones. This gives you a chance to choose the appropriate loan that you need and manage your financial difficulty properly avoiding repercussions. And when you encounter a loan shark, do not hesitate to report to the police. Necessary legal actions must be done for everybody’s safety.