Don't make the mistake of going to a loan shark if you have bad credit and need money badly. Many people think that loan sharks only exist in Hollywood movies, but there are many lenders who will take advantage of you and act like loan sharks. If you want a loan but don't know how to avoid loan sharks, here are some tips.
Describe a loan shark.
In essence, a loan shark is a lender who gives loans to people with bad credit or who are having trouble paying their bills at very high interest rates. High interest rates allow the lender to make a lot of money off of people who think they can't get a loan anywhere else. Most contracts aren't fair, and if a borrower doesn't pay or doesn't pay on time, they face harsh penalties. People call these people "loan sharks" because they take advantage of people to get money.
High loan costs
In addition to the interest, loan sharks often charge high fees, which add to the total cost of the loan. Most of the time, the borrower doesn't know much about these fees, so they might not notice that they're paying a lot more money for no reason. Fees for these kinds of loans can be as much as 5% of the total amount of the loan. Another common type of fee is one for paying off the loan early. A lot of good loans don't have these fees, but loan sharks can charge up to 6 months' worth of interest if you pay off your loan early.
A lot of interest charges
Loan sharks look for people who have trouble getting loans and charge them very high interest rates for the "convenience" of giving them money. These rates could be three or four times higher than what you would normally pay. Even if you have bad credit, you don't have to pay this much. Even if you have bad credit, you can find loans with prices that are competitive if you look around.
Giving you too much credit
Loan sharks don't really care if you can pay back a loan, because they usually make contracts that are unfair and ask for collateral, so if you don't pay back, you'll lose your home. Because of this, these lenders will let you borrow more than you really can pay back. They make so much money from the interest and fees that even if you don't pay and they take your property back, they will still make money.
How to avoid loan sharks
People who think they can't get a loan any other way go to loan sharks. But even if you have bad credit, you can still get a legitimate loan with fair rates and no extra fees. To avoid becoming a victim of a loan shark, only get loans from reputable companies and always read the contract carefully before signing it. If you're not sure about a loan or a company that gives loans, you should talk to a financial advisor who works on their own. Loan sharks and their predatory loans won't be able to take advantage of you if you look around and stay aware of the risks.
