There is a big difference between the ability to spot a loan shark and actually avoiding this type of “lender.”

Those who are unfamiliar with the pitfalls of loan shark borrowing often find themselves considering this arrangement. Acting on this could be one of the biggest financial mistakes you ever make, either from a personal or business perspective.

Here are some of the many pitfalls associated with loan shark borrowing:

  1. High interest rate. Hands down, this is one of the first things you will recognize. Loan sharks don’t care what traditional lenders are doing. They set their rates extremely high, as this puts them in position to make as much money as possible.
  2. Lack of organization. Loan sharks make it easy to get a loan. This is why so many people consider this alternative to traditional lending. The problem with this is that these so-called lenders don’t have the organization and structure necessary to lend money in the appropriate manner.
  3. Danger, danger, danger. That is exactly what should be going through your head as you contemplate an agreement with a loan shark. It doesn’t matter what type of loan you are seeking, you should only consider a relationship with a reputable lender. Anything else is extremely dangerous, as loan sharks have a bad reputation for using scare tactics (or worse) to get what they want.

Borrowing from a loan shark is typically easier than securing a loan from a traditional bank. Of course, this comes at a cost. The pitfalls above should be more than enough to scare you away from this financial decision.

Can you think of any other reasons to avoid loan shark borrowing at all costs?

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