Without a doubt, loan sharks are notorious for several reasons. Their high-interest rates and exorbitant fees make borrowers feel stress and desperation. With their tactics and schemes, loan sharks are always on the prowl looking for a victim. If you are looking to avail of a loan, you should always make a transaction with legitimate financial institutions like banks and licensed moneylenders.
However, it is always important to know the enemy. Thus, for you to avoid loan sharks, here are the loan shark tactics and schemes you should know.
- Loan sharks masquerade themselves as licensed moneylenders.
Loan sharks are known to find ways to lure more victims, which is not surprising that they will masquerade themselves as licensed moneylenders. Loan sharks, to advertise loan offers, use the license number and business name of a licensed moneylender. Most of these loan sharks call, send an SMS, or an email stating that they are a representative of a legitimate moneylender.
These loan sharks advertise flexible payment terms with low-interest rates that can capture the attention of unwary borrowers. These borrowers who may be desperate for money will respond to these advertisements. Once they make a transaction with a loan shark, these borrowers will become victims as loan sharks are known to charge high-interest rates and exorbitant fees.
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When transacting with a licensed moneylender, you should always look for evidence that the license of the moneylender is legitimate. Verify the license number, business name, and address of the moneylender by comparing it with the List of Licensed Moneylenders in Singapore, which you can find on the website of Singapore’s Ministry of Law. Look for reviews, permits, certifications, and identifications that can support the moneylender’s claim.
- Ever received a call, an SMS, or an email stating you are eligible for a loan?
Licensed moneylenders are allowed to advertise through only three channels, namely:
- Consumer or business directories that are through an online media or in print
- Websites that are owned by the moneylender. On the website of Singapore’s Ministry of Law, you can find the list of licensed moneylenders in Singapore and their business website.
- Advertisements that are within the business premises of the moneylender
Loan sharks are notorious for sending calls, SMS, or emails to different people stating that they are eligible for a loan. This kind of advertisement allows loan sharks to cast a wide net, hoping that it can ensnare a borrower. If you ever receive an illegal form of moneylending advertisement, you should ignore this advertisement and report this to the Police.
- Threats and harassments are a common practice.
Borrowers become victims of loan sharks because of unethical moneylending practices that put the borrower in a financial burden. Borrowers feel stress and desperate to look for ways to settle their debt. One of the reasons why borrowers feel stress is because of threats and harassments made by loan sharks. If the borrower misses even one payment, then the loan shark will issue threats to the borrower.
These threats are not only limited to the borrower but can extend to the borrower’s family and friends. If you do not want to become a victim of loan sharks, then never make a transaction with a loan shark.
- No more paperwork? No more documents?
One of the reasons why people turn to loan sharks is because of desperation. These people may have numerous loan applications that were denied by banks and licensed moneylenders because of several reasons. This desperation forces people to seek help from questionable and illegal financial sources. Loan sharks can offer to grant a person’s loan without any contract signing or requiring any form of documents from the borrower.
While this may sound convenient to the borrower, this kind of convenience opens up a new set of problems for the borrower. Loan sharks are known to charge high-interest rates and exorbitant fees that make repayment almost impossible.
- Asks you to pay an upfront fee before they can grant your loan.
Licensed moneylenders can charge an upfront administrative fee of not more than 10% of the principal amount of the loan, but for this fee to be charged, the moneylender needs to approve and to grant the loan first. Loan sharks and unlicensed moneylenders will ask the borrower to pay the upfront first before they can receive the money. Of course, being loan sharks, the upfront fee can be high as 20% of the principal amount of the loan.
- Asking for collateral regardless of the amount of the loan.
Personal loans and payday loans have the advantage of being unsecured loans, which means a borrower does not need to set collateral for the loan. While almost all licensed moneylenders and banks offer an unsecured personal loan and payday loan, loan sharks have a different kind of practice. Regardless of the borrowed amount, loan sharks will take personal items or identification cards of the borrower as collateral. As you may know, licensed moneylenders are not allowed to retain personal identifications of the borrower.
Loan sharks will only return these to the borrower if the borrower has repaid the loan fully, which may take a long time.
- Loan sharks will not issue receipts for every time you make repayment.
Receipts are proof of payment for every purchased item or repayment for a loan. Loan sharks will not issue receipts to prevent borrowers from fully repaying their loans. This kind of practice sometimes leads the borrower to overpay their loan.
Always transact with a licensed moneylender…
With the availability of numerous moneylenders in Singapore, finding the right one can be difficult. If you are in need of a low interest payday loan, you should always find a licensed moneylender.