Since the COVID pandemic, millions of people have struggled to get back on track paying the rent and getting food in. Therefore, many of us have had to search out new sources of income, and for some of us, that means getting a loan in the meantime.
Yet, whatever the reason is that you want to get a loan, there are always going to be dodgy loan sharks lurking and preying on new borrowers. They like to hone in on people that are desperate for immediate cash, but they can destroy lives with their scams.
So, if you need to borrow money, this guide will help you understand how to deal with such illegal lenders and avoid their scams.
What Is a Loan Shark?
A loan shark is an unlicensed illegal lender who will prey on those who need money but can’t receive it from a legitimate source. Although they may appear pleasant at first, taking money from them is not a wise choice. And this may still be true, even if there aren’t any other options on the table.
Since loan sharks operate illegally, they are not scared to use means outside of the law to retrieve their money. So if you find yourself in a situation where you can’t pay them back on time, you can see your debts soar with them. And worse case scenarios may involve violence and threatening behavior towards you and your family.
How To Spot a Loan Shark
First off, any legal lender of money should be a member of the Financial Conduct Authority (FCA). You can check on their site to see if the lender you are dealing with is a registered member.
Another easy to spot a loan shark is if they have limited or no paperwork to offer you. Since paperwork is rather official, these types of money lenders try to avoid using it.
Another sign that you might be dealing with a dodgy lender is if they loan you the money in cash. However, nowadays, you will come across some that will do ban transfers.
It should be a real no-go situation for you if you ask about the loan details and they are vague. Many loan sharks will try and drift past such questions and may charm you with the prospect of having money straight away. Avoid such lenders at all costs, as they may demand ridiculous interest rates in the future!
Also, if the lender wants to take any of your possessions on the spot as collateral, they are irresponsible lenders for sure. Some may want your passport, bank cards, computers, or other valuable items.
Go To Your Credit Union Or Bank First
For those who are struggling to make payments, it’s worth checking with your credit union or bank to see if they can help. They may be understanding that many people have suffered as a consequence of the pandemic. Some may even have lending schemes in place to help people in sticky financial situations because of this.
Some banks have what they call “hardship plans” where they may offer smaller fees or lower interest rates. So before you jump towards an opportunity that seems too good to be true and avoid loan sharks, check with your bank!
Ask for Special Consideration
If you lost your job but have a decent history with your banking institution or union, you might be in a strong position. Some banks may not offer hardship loans as a standard service they advertise. However, the institution may look at people on a case-by-case basis.
So even if you don’t see any hardship programs advertised with your institution, it is still worth going in and being honest about your situation. It might surprise you that they are more than willing to help out in the short term, given your solid record with them.
Watch Out for High-Interest Rates
Regulated institutions, such as banks and credit unions, tend to offer interest rates between 2.5-10%. These are reasonable rates, and the ones you should be looking to get if you need to borrow money in the short term.
If you see interest rates over 20%, then you should try to avoid those lenders at all costs. These sorts of interest rates are trademark interest rate levels that payday loan operators often use. These are illegal lenders that may even ask for access to your account!
Look Online for Government Assistance
During the pandemic, there were some government initiatives in place to help people struggling with their finances. Some of these may be ongoing.
We suggest you check out the UK government’s web page concerning coronavirus for more information. It’s not a good idea that we mention what’s on there now, as policies and programs can change with the government.
Find Reputable Lenders
In the end, what we are suggesting in this article is that you try every official channel to borrow money before you even contemplate going to a potential loan shark.
Yes, it may seem like more effort and longwinded, but in the long run, you will be much better off choosing official borrowing channels. Plus, if you go down the government route for financial aid, you might even be eligible for free money in the form of a grant!
The Future of Loan Sharks
Many may welcome the recent fall of QuikQuid in recent times. This was the UK’s biggest payday loan provider before its demise, in the UK at least (view here for more).
But in general, loan sharks come in all shapes and forms, whether they are huge companies right through to individuals living in your local area. With there being a demand from people who can’t find money anywhere else, there will always be loan sharks lurking.
Stay Clear From Loan Sharks
We can’t stress enough how much you’ll be better off by avoiding loan sharks. These scammers wreck people’s lives, and it may go on for years and years. Instead, check every available legal avenue you can find to borrow money.
Thanks for reading through this post and good luck with finding the funds you need. If you found this useful, why not discover more helpful advice and tips on our blog?
