Q:

What are personal loan sharks?

A:

Quick Answer

A loan shark is a lender who offers personal loans at extremely high interest rates. These rates may often be above legal limits, and loan sharks may practice intimidation or threats to collect loan repayments.

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Full Answer

Loan sharks typically target desperate, low-income individuals who are unable to secure loans through conventional means. They often come on friendly at first, offering loans without the hassle of paperwork or any sort of credit check. However, if the borrower has trouble paying back the money, the loan shark becomes aggressive, threatening violence or harm to the borrower’s reputation. Loan sharks may engage in any number of illegal lending practices, such as increasing the interest rate or the amount of the debt itself without warning, refusing to reveal the amount of the interest rate or the amount left to pay on the loan or taking personal items, such as driver’s licenses or credit cards, as collateral.

While modern loan sharks are often associated with the criminal underworld, many non-traditional but still legal services have increasingly taken their place, such as payday loan establishments. Like loan sharks, these businesses typically serve low-income individuals who are in need of quick cash. A 2001 study found that, depending on the speed with which a loan was repaid, organized crime syndicates sometimes offered less severe interest rates than some payday loan establishments.

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