3 Reasons To Avoid a Loan Shark Like the Plague

A loan shark lends money illegally and charges extremely high interest rates. We look at three reasons to avoid a loan shark like the plague.
U
Melissa
Cohen
Published: Friday, November 11th 2016
General
Debt review organisations, like Debt Rescue and Debt Busters, exist primarily to help those of us who manage to get into debt up to our eyeballs, get out of debt. Hey. It can happen to anyone. But, once we’re declared over-indebted, we cannot take out more credit. Unless, of course, we go the illegal route of borrowing from a loan shark.

What Is a Loan Shark?

tumblr_mprc9zUNNA1rv3b62o1_500 Loan sharks, as I’m sure we’re all aware, are not sharks you can borrow from the aquarium. A loan shark is someone, or a small organisation, who lends money and charges extremely high interest rates. This is typically an illegal service, although there are so-called ‘registered loan sharks’. Borrowing from a loan shark has been described as the illegal version of a payday loan (short-term loan). But a loan shark does not have the legal standing that these micro lenders do when it comes to paying back what you owe. So, where one organisation would report you, a loan shark has to resort to, well, alternative methods.  Once we get into a spiral of debt, it’s extremely difficult to get out. If you become over-indebted and don’t seek debt counselling, it’s not uncommon to find yourself with a bad credit score and unable to apply for any more credit. Loan sharks provide unsecured loans to people like these who who may not fulfil the lending criteria of legal institutions. While we’ve heard of the unscrupulous collections methods illegal lenders employ, desperate times call for desperate measures. We looked at three of the countless cases of loan shark lending gone awry.

Loan Shark Horror Stories

One woman reported to Fin24 how she had borrowed R6,000.00 from a loan shark to pay for her father’s funeral. She was unemployed, did not have any savings, or a funeral policy, to give her father a dignified send off. She knew a traditional lender wouldn’t help her, so she approached a township loan shark.  She handed over her ID document as collateral, which is common practice in these situations, as is handing over pension cards, bank cards, and cellphones. The Mashonisa, as these lenders are commonly referred to (as well as “dream demon”), urged the woman to sign documents she didn’t read. Within a few days she had the money to pay for the funeral.  She discovered later, however, that she had signed over her house. In fear of losing her home, and under threat of her loved ones being harmed, she ended up eventually paying ten times what she owed. That’s one of the happier stories. In September this year, the Sowetan Live reported on two cases where a loan shark had actually stabbed their victims. One man had been stabbed to death in view of his family and six month-old daughter for failing to pay up in time.  The other man, 42, took a R100 loan in 2010 to pay for transport, while job hunting, and was expected to pay back R150. The loan shark disappeared for years then resurfaced this year claiming the man owed him R12,500.00. He refused to pay, but was later stabbed in the shoulder by the man who threatened to return with a gun.  In a February 2016 operation, the National Credit Regulator (NCR) retrieved 930 bank and pension cards, and 149 ID books from illegal lenders in Limpopo. Eight people were arrested.  debt review

3 Simple Reasons To Avoid a Loan Shark

  1. You Can’t Afford It

Banks make money from lending people money. So, if they won’t lend you money, there’s probably good reason. Rather than get into the same debt at a higher cost (in interest and risk to your life), Google ‘how to get out of debt’.
  1. It’s Illegal

Okay, we know for some people this may not be reason enough. But, if the people lending you money don’t have a legal standing, you can guess they don’t have a high regard for the law. How do you reason with someone like that?
  1. They Will Cut You

We’ve already showed you two incidents where people were stabbed. With a knife. That’s just the stories that made it onto the internet. Another story floating around online is that a man was cut on his genitals. Just, no.