If you find yourself in need of a loan, regardless of the reason, there will be a lot on your mind. However, you have to ensure yourself of one thing: that you are doing business with a reputable lender.

The last thing you want to do is find yourself involved with a loan shark. These people or “companies” prey on borrowers who are in need of quick cash. They have no problem giving you the money you need, but it will come at a cost. Not only will you be charged a high rate of interest, but you could soon find yourself a victim of threats and even violence.

Now are you beginning to see why you should avoid this type of lender?

Ask these Questions

Those who are uninformed and unsure of how to spot a loan shark may not realize that they are about to make a bad decision. Fortunately, you can separate loan sharks from reputable lenders by asking the following questions:

Can you provide me with documentation related to the loan?

Most loan sharks don’t care about paperwork, applications, or any sort of documentation. Instead, all they want is to loan you money and charge you a high rate of interest.

Reputable lenders will require you to go through an application process. Additionally, they will provide you details of your loan, such as the term and interest rate, before you sign on the dotted line.

If a lender doesn’t believe in paperwork you are dealing with a loan shark.

What is the interest rate associated with my loan?

Obviously, this is one of the most important questions you need to ask regardless of the lender you are speaking with. If you don’t know the interest rate how do you know you are getting the best loan for your financial situation?

Loan sharks don’t like to supply borrowers with this information. There are two reasons for this:

• The rate will be so high that it is likely to scare the borrower away
• These lenders make it a habit of increasing the rate from time to time as a means of earning more money

What is my monthly payment and when will the loan be paid off for good?

A loan shark will dance around this question, trying their best to confuse you. One of the primary reasons for this is that they often times increase the amount of debt that is owed without your permission. Doesn’t sound fair, does it?

When you use common sense, you should not have any problem spotting a loan shark from a mile away. To make sure you are on the right track and not borrowing from a predatory lender, ask the three questions above.

Are you worried about borrowing money from the wrong type of lender? Are you concerned that you could get caught up in a deal with a loan shark? If so, you are not alone.

As unfortunate as it may be, there are “lenders” out there who prey on low income, desperate individuals who are in need of a loan.

At first, these lenders appear to be on your side. They will do whatever they can to answer your questions, and of course, lend you the money you are seeking.

On the surface, the benefits of working with this type of lender may be appealing:

• Your credit score will have little to no impact on your ability to receive a loan
• There is minimal paperwork involved with the application

As the old saying goes, “this is too good to be true.”

These lenders are known for all the following:

• Increasing your debt without reason
• Refusing to give you information related to the loan, such as the interest rate
• Asking to take items, such as passports or bank accounts, as “security”

If you keep making payments as required, loan sharks most often times remain friendly. Miss a payment, however, and you never know what the lender may try.

What are the risks associated with borrowing money from a loan shark?

• You will pay a far greater amount in interest than you would through a reputable lender
• If you miss a payment you will be harassed, with this often times turning towards intimidation
• It will not be long before the loan shark is pressuring you to borrow more money

As you can see, these risks far outweigh any potential benefits.

Now that you know more about risks associated with conducting business with a loan shark, it is time to learn how to spot these predatory lenders. Here are a few telltale signs:

• No paperwork or documentation
• Increase the amount of debt owed without your permission
• Will not allow you to payoff the loan early
• “Dance” around questions related to the loan you are applying for
• Unwilling to tell you the interest rate

Regardless of how desperate you may be for a loan, it is imperative that you only do business with a reputable lender.

This advice should help you spot a loan shark, allowing you to avoid these predatory lenders at all costs.

Important Resources To Help You:

The following are a list of legitimate financial resources to help set your path right.

1. Gov Loans – Access to information for government sponsored loan programs by sector. This site is a portal that provides an overview for their main programs.
2. Credit Cards: Finance Globe provides research for hundreds of credit cards that include annual percentage rates, annual fees, grace periods, and other vital information. Their tools allow you to shop and compare before you apply.
3. FDIC Consumer Protection: View consumer protection tips, news and publications.
4. NFCC: The National Foundation for Credit Counseling promotes financially responsible practices.
5. Better Business Bureau Search: Find history and complaints on a business or charity.
6. The Center For Responsible Lending: The Center for Responsible Lending is a nonprofit, nonpartisan research and policy organization dedicated to protecting homeownership and family wealth by working to eliminate abusive financial practices.

Protect Yourself From Predatory Lenders

• Use your financial common sense; if you can’t afford it, you shouldn’t buy it.
• Plan a realistic budget and stick to it.
• Have a savings plan so that you’ll be prepared in case of a true emergency.
• Keep your credit rating high so that you won’t be forced to go with “sub-prime” lenders, where predatory lending is common.
• Be skeptical about quick fixes and easy money.
• If it sounds too good to be true, it probably is.
• Bad credit, no credit, no problem! This is one of predatory lenders favorite lines.
• Buy here, pay here! Rent to own. No money down! You must act now! Some of their other favorite lines.
• Any loan, including your first mortgage, which uses the equity in your house as collateral should be looked at very carefully.
• Know what it is you’re signing, and never sign documents that don’t have all the terms filled in.
• If you don’t understand the contract in question, consult an attorney. Lawyer fees can be a bargain compared to the potential loss.
• Shop around for loans of any kind; never say yes to the first offer.
• Visit The Center For Responsible Lending for information about laws to protect you, or how you can get involved in the fight against predatory lending.
• Don’t let salesmen pressure you into something you aren’t sure about.
• Refuse to take out more loans to pay off already unmanageable debts.
• Beware of the temptingly low interest rates that skyrocket after you’ve had enough time to shop more than you should.
• Take responsibility for your financial well-being.
• Predatory lenders are out there taking money, but don’t let them take yours.