If you’ve been refused credit through your bank or a licensed lender, you may be tempted to go down the more dangerous route of borrowing from a loan shark or rogue lender. While it can be a good way to get money fast if your loan applications aren’t accepted elsewhere, getting a loan from a loan shark could be the worst financial decision you could make.
A loan shark is basically either a company or individual who will offer high interest loans (typically over 100%) to people who can’t, or won’t, get a loan through more reputable means. These loans are unsecured, meaning you don’t need any form of security such as your house to take one out, but your health may be put up as security instead - loan sharks will often use harassment, blackmail or threats of violence in order to get their repayments from a borrower.
A loan shark won’t be registered with the OFT as all licensed lenders should be, and therefore are operating illegally. A licensed lender will only deal with electronic transfers, so if the lender insists on cash only, it’s a good chance they are illegal and should be reported. If you have taken a loan out with a shark you are under no legal obligation to repay it, and should contact your nearest Trading Standards office to help you deal with the problem.
Loan sharks should not be confused with those companies who offer payday loans. While these loans also come with high interest rates, the companies are legal due to their terms and conditions, and the fact that they only offer small amounts (up to around £1000) under a short-term contract - the loan needs to be paid back on your next payday, plus interest. Payday loans can be handy for extra cash during Christmas, or if a holiday is looming. Provided you can afford the repayments and interest, usually £28 for every £100 borrowed, a payday loan is deemed a good way to get money fast as very few criteria need to be met.
When applying for loans, check that the lender is registered with the OFT. Taking out unsecured loans can be risky if the lender isn’t licensed. Remember, those companies offering payday loans need to be registered too. Always borrow from reputable sources.
Tags: payday loans, loans
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