If you have been denied credit from an authorised and regulated loan provider, you may be considering using a loan shark. But community loan sharks can have a nasty bite…
What is a community loan shark?
A loan shark is someone offering personal unsecured loans illegally within local communities, usually part of a criminal group. If they do not get their money back, they threaten the individual with violence or taking possessions from them or their families. People typically use loan sharks because they do not have the ability to use authorised and regulated loan providers, possibly due to previous debts and a poor credit score.
Community loan sharks are widespread in most countries, even developed nations. Research on the South African informal lending market published by online loan company Wonga reveals a low estimate of 40,000 loan sharks in operation in South Africa alone. The online lender also found that some people were using loan sharks as well as legal loan providers at the same time. to maximise their available credit at any one time.
There is a heightened risk of people using loan sharks during and after the COVID-19 pandemic. It was reported by the BBC that the Italian Mafia have been offering loans and food during the pandemic as a way to trap people into their debt while under the guise of supporting local communities.
New ways for loan sharks to make contact
When you think of a community loan shark, you probably think of these illegal creditors knocking on doors or whispering in bars. But the modern loan shark can make contact in other ways.
Many victims are being contacted through social media platforms or messaging apps, such as WhatsApp and Snapchat. The Guardian reported that 10% of victims are contacted through social media. Some loan sharks are even trying to offer their money through dating apps, such as Tinder.
Not only is this a less intimidating way to ensnare potential victims, it also means the shark can massively increase the ‘reach’ of their service, contacting many thousands of people in a relatively short amount of t
The bite of the loan shark
Loan sharks can feel like a saving grace if you have already been denied credit from a legal online loan provider and you’re struggling.
But loan sharks have a nasty bite. They usually ask for a bigger repayment than a legal creditor and they don’t have to stick to their word like a legal creditor. They may continue to harass you and your family if they decide they want more money, or they could threaten to physically harm you. You may even be blackmailed if they know you’re borrowing money for a reason close friends and family do not know about.
The key takeaway
The key takeaway is to avoid loan sharks at all costs. Naturally, some people feel like they have no other option but to accept the money with no questions asked. However, you could make your situation worse.
It is better to create a monthly budget, look for saving tips, speak with creditors to consolidate your debt and arrange affordable repayment plans. And don’t forget that debt charities are on hand to give free support and advice. Don’t take the short term ‘easy’ option; it’s anything but!