Anyone who offers money outside of the traditional financial institutions and charges exorbitant interest rates that may climb beyond the level of legally permitted rates are referred to as “loan sharks.”
There is a lot of confusion that surrounds the term “loan sharks”, as in today’s popular mind it is often related to organized crime and is thought of as any gangster who may even resort to physical brutality threats if you fail to repay the debt or loan shark money. While there are loan sharks that fit the above statement, not all of them can be categorized in a similar bracket. In fact, the foremost loan sharks were never linked to any criminal activities. This phrase was previously used for chattel mortgage and salary lenders who existed during the end of twentieth century.
These creditors used to charge interest rates of around 20% and offered small loan amounts. Being interest-only, many of these deals required a lump sum payment in order to retire your principal amount completely. So, sometimes even the short-term loans dragged on for years.
Loan sharks proliferated soon in huge cities, where people often fall short of cash as their expenses overreached their income. Office clerks, factory hands, and government employees were the most common customers of these sharks. During the initial phase of the 20th century, an estimated one in every five U.S. urban households borrowed from loan sharks.
Nowadays, it is easy to trace loan sharks online and even though you might find a legal loan shark that does not resort to any physical brutality threats, they still charge extremely high interest rates. So, you can indeed save a lot of money by avoiding such a situation. Hence, in case you can wait a little, it is better to search for a few alternatives instead of finding a loan shark straightaway. Given below are a few alternatives you may consider:
- Credit Unions – Groups of people form cooperatives where they use a “pool savings” method to issue loans to members whenever required. Usually, people of the same community join this group and follow a certain set of rules about who all are permitted to join the group and others. Credit unions also offer basic financial assistance and tips for better budgeting. So, here you can get easy and short-term loans at reasonable interest rates.
- Municipal banks/Council banks – Put into effect by government, these banks especially focus on providing financial assistance to people with low incomes. As these people are unable to qualify through general loan requirements, these banks extend loan money to these people at very cheap rates of interest.
- Doorstep lending – This is another good alternative to loan shark money. While interest rates can be high in doorstep lending as well, anyone with low income and bad credit rating can qualify for loans this way. You would say it is same as loan sharks as well. Isn’t it? Well, not really. This is a completely legal method of lending money and is best for anyone who does not wish to take any risk by falling prey to illegal loan sharks. The loan amount starts from £100. The repayment needs to be done every week as an agent gets in touch. Lenderscompared.org.uk is the site you may check to know several doorstep lending deals.