Disadvantages of Taking a Loan from “Loan Shark”
Loan sharks are illegal money lenders operating in Singapore and usually target poor and desperate borrowers.
They attempt to lure you into borrowing with them by being friendly and offering very attractive terms when the bank has turned you off due to a poor credit rating.
However, the money that they give you comes with a very high price, not to mention the risk. You might think it won’t be bad if you are applying for a small loan that you’ll clear within the shortest time period but that’s not the case. Here is why
Never Ending Interest Rates
Borrows get attracted to loan sharks because they find the loan application process very simple as they don’t have to make trips to the bank or money lender’s offices since everything is handled online.
However, that convenience comes with a cost, they add extra charges not agreed upon at the point of the loan application. That is not enough, they add daily interest upon default which makes a small loan build up to huge amounts leaving you into a financial crisis.
The sad thing is that, instead of empowering these poor and desperate borrowers, they burry them deep into the pit of debt.
Unlike banks and other recommended licensed money lenders loan sharks do not necessarily have clear loan terms and conditions. So you are never sure what your terms are and therefore, they can subject you to some crazy interest and other illegal charges.
In most cases, illegal money lenders will give you a blank paper for a contract to sign, of which they add some information that you are not aware of later after they’ve processed the loan. Whatever is put there in becomes binding as you’ll have signed the document though you signed when it was blank.
Personal Possessions Taken as Security
Although illegal, loan sharks will ask for your passport, bank cards, and other important personal documents as a security deposit. This is to guarantee that you won’t run away before settling your debt
Your personal identification documents are yours by law and they should be in your possession at any given time. Your personal information should be protected to avoid access to illegal identity duplication or identity theft.
Trading your personal identification documents for a loan is not worth any amount of money as it can easily be abused and cost you more than the benefit derived.
No Option of Full Settlement
Unlike the recommended licensed moneylender, loan sharks rarely allow the borrower to settle the loan in full. This is to keep you paying the high-interest rate that is ultimately their profit. In the event that they allow you to pay in full, the load full interest that you could have paid if you waited for the full term.
Pressure to Clear One Loan with Another
Loan sharks will come with all sorts of solutions in the name of helping you fix your financial problems. If they find you struggling with loan repayments, they’ll advise you to borrow from another loan shark so as to clear their loan fully to avoid future penalties.
Don’t be fooled, this will just get you into a larger debt with even higher interest rates and you’ll be left to pay that loan forever.
Violence and Harassment
When you are unable to meet your monthly installment, they’ll issue threats and subject you to a lot of harassment. They even involve family members and friends in their coercion to force you to clear the debt.
In a nutshell, the best way to deal with loan sharks is not to deal with them at all.