Loan sharks are not the way forward, no matter how much of a financial mess you might find yourself in. You may hear people tell you that they ‘know this guy who loans you money, and doesn’t even ask for papers’. This person will, without question, be an illegitimate form of credit, and a dangerous one at that. He who loans you the money may be a friend, a friends of a friend, or a family member of a friend – and no matter how much you may trust your friends, it’s not worth the problems that will undoubtedly come with the loan. There are many disadvantages to using a loan shark, as well as a number of reasons why they are dangerous and should never be used.
Loan sharks charge weekly interest rates, as opposed to annual rates. This means that the amount you pay back in interest will be sky high, especially if you need a longer period of time to make the repayment. Bank loans and all other legitimate forms of credit will do everything through an annual rate, making the interest more reasonable and manageable to repay. Loan sharks don’t care about how easy it is for you to make the repayment – they simply want their money back through whatever means they may have to use.
Say you agree to a 6% weekly interest rate, and your loan lasts a year. That equates to an APR of 288%! That’s absurd, especially given the much smaller APRs that can be found in legitimate bank loans. You’re much better off opting for legitimate payday loans.
Payments are often confusing, too. The weekly interest rates that you pay may initially not seem all that high, but in the long run can easily add up to 30 times or more higher than what you would pay in a more traditional, legitimate credit agreement.
Finally, loan sharks do not report to credit bureaus. In order to protect and maintain your good credit rating, all your credit and transactions will need to be reported to credible credit bureaus. If you are not able to have your credit agreement reported to credible credit bureaus, then you repayments will not be registered and will technically never have existed in regards to your credit rating. There will be no technical and legal record of any of your loan repayments. Stay safe, and stay away from these illegitimate and dangerous credit providers.