Taking a loan for the first time can be quite confusing for people from all around the world, as the process requires a multitude of documents, alongside with a bit of time to get everything set up. At this moment in time, many people choose to consider loan sharks, rather than banks for various reasons. For those who do not know, the term of loan shark can refer to either an individual or company that offers loans at considerably higher interest rates.
Surprisingly, upon hearing the term, many people tend to believe that it only refers to illegal lending and borrowing, yet this is not always the case. In terms of the illegal loan sharks, they are known to enforce repayment by making numerous threats of violence, blackmail and more, especially in the criminal underworld.
Loan sharks in history
To put things better into perspective and understand more about the concept, loan sharks initially appeared back in the 19th century, in the United States. As the low legal interest made loans quite unprofitable, and that short-time lending was frowned upon by the society, numerous loan sharks appeared to take on this business that most banks and other financial institutions chose to stay away from. However, most loan sharks at that moment in time carried out their activity illegally, and offered short-term loans with very high interest rates, which people still bought due to having no other choice. A few decades ago, loan sharks presented themselves as official and registered agencies, operating out of actual offices, and who were willing to offer loans without credit checks, yet chose violence in case the debts weren’t paid back on time. Their way of operation also included making clients sign a wide variety of contracts that seemed legitimate at first, but which were actually, of no actual legal value at all, and would only be used to blackmail clients into paying the debt back. However, their way of operation was quite smart, considering the fact that the size of the loan alongside with the repayment plan depended based on the borrower’s means, which meant that they would not lose funds, and continue gaining profit through the extremely high interest rates which were charged.
Back in time, the legal penalties for being a loan shark and offering loans illegally were quite law, as the usual penalty was forfeiture of the interest, and sometimes, of the principal as well. Loan sharks weren’t susceptible to jail time or massive fines, thus making the job seem like a great chance to earn some money for people who already had capital.
Loan sharks today
As time passed, better legislative framework was put into action, thus requiring all loan agencies to sign up, and follow a set guideline of laws. Failing to respect them leads to massive fines, and also potential jail time for the people implicated in the action.
Unfortunately, some people tend to consider payday loan agencies as the new loan sharks, yet this is false. Payday loan agencies operate under strict regulation, and would never resort to violence or threats in order to make clients pay up their debt. They are far more professional, thus becoming considerably more trustworthy as well. In case you do not know, the payday loan market has exceeded a few billion dollars all around the world, and is worth a few million as well in the UK.
In terms of the actual loan sharks, they are still around today, especially in the criminal underworld, and still resort to some of the tricks present in the past. However, their freedom of operation was drastically reduced, with law enforcement agencies actively trying to eliminate all loan sharks from society. Some of today’s loan sharks are known to have mafia-ties, and also be dangerous, especially in regions where the concept remains unregulated by the government.
However, in the UK, the chances of having to deal with a loan shark are quite small, considering the government’s activity in the region. Most payday loan agencies operate legally, and strictly follow their legislative framework, so the chances of dealing with an illegally-operating agency are quite small. Regardless, it’s still best to carry out your research, read reviews, seek recommendations, check the payment plans, their terms and conditions, and use this information when it comes down to deciding whether to borrow from an agency or not.
Additionally, if you’re looking for a higher, or long-term loan, then you might want to consider banks, as they have better plans for this type of loans, regardless of the eligibility requirements being considerably higher.
Based on everything that has been outlined so far, the presence of dangerous loan sharks has been lowered in today’s society, and payday loan agencies shouldn’t be confused with these individuals or phantom agencies.