There are a lot of reasons why a person might need a loan, and with the poor economy that countries around the world are experiencing, there is many people being forced to loan money to get what they need. There are a lot of options available but, there may be some lenders who decide to loan from loan sharks. If you find yourself considering lending from loan sharks, you must first ask yourself, what is a loan shark? You must also have an idea of the different types that are available.
What Is a Loan Shark?
When it comes to legally lending out money, the lender must be licensed by the Office of Fair Trading or OFT. Unfortunately, there are people and organizations who lend money without a license thus they are breaking the law. These people and organizations are known as loan sharks.
Loan sharks are unlicensed money lenders. These people and organizations are not regulated, and they do not practice the OFT’s codes of practice. Usually, a loan shark needed the lenders to pay high interest rates in order to gain money. For this reason, when a person decides to deal with a loan shark, the borrower will experience various problems such as getting bad terms on the loan, no safeguards once they get behind their payments, being harassed into taking out more loans, and pay huge interest rates. Loan sharks can also use illegal actions to collect money from their borrowers such as threatening violence or taking away credit cards and valuables. However in some states these types of lenders are legal when licensed, so what is the difference.
The Different Types Of Loan Sharks
Now that you know the answer to the question, “what is a loan shark?” you now need to learn about the difference between those that are licensed and unlicensed.
Unlicensed loan sharks are those who provide and the get their repayment of the money any which way they can. These are the type, that people typically think of when visualising a loan shark, and these are the kinds of people that must be avoided.
The licensed loan sharks, on the other hand, are considered as the best of this kind since they are legal, and they will not physically harm their borrowers. However, the interest rates are still very high. Licensed loan sharks can include businesses involving payday advance. In some countries, the licensed loan shark is monitored and evaluated by the OFT, and they must follow the rules and regulations. If you are considering borrowing from a licensed loan shark, then it may be worthwhile checking the Consumer Credit Public Register to ascertain whether the lender is licensed by the OFT, and if they can be trusted too.
Why Some People Consider Borrowing From Loan Sharks
There are some people who prefer to deal with loans sharks since it is faster and you don’t need to have outstanding credit history as compared to applying for loans from banks or other financial institutions. Banks require a lot of application to be filled out, credit checks, and proof of identity.