If you desperately need a loan shark, here are 7 alternatives: installment loans, payday loans, car title loans, credit card cash advance, secured loans, brokered loans, and credit union loans. The best loan option for you depends on your financial needs, repayment preferences, and credit history.
According to a 2020 OECD survey, 43% of people across 25 countries “borrowed informally” from family, friends, or loan sharks.1 Unfortunately, many of these borrowers end up stuck paying illegal money lenders for years.
To avoid working with unlicensed loan sharks, staying informed about the types of online lenders and loan products available is vital. Keep reading to learn how loan sharks work and about your loan alternatives.
What Are Loan Sharks?
Loans sharks are predatory lenders who run illegal lending operations. Loan sharks use predatory or illegal lending practices like bait-and-switching and sometimes even blatantly false advertising.
Funding from loan sharks can also stick you with a loan contract and loan terms that don’t work for you. And since loan sharks have their best interest in mind, not yours, they are often unwilling to work with borrowers regarding refinancing for better rates and terms.
To ensure you don’t get stuck with a predatory loan shark, research your lender before signing your loan agreement. Perhaps look at customer reviews to see what the experience was like for other borrowers or compare personal loans to find the best rate.
Check out the alternative funding options below, so you don’t have to worry about loan sharks that lend money illegally!
Warning Signs of a Loan Shark
If you desperately need a loan for bad credit, it’s critical to know the warning signs of a loan shark. Unfortunately, it’s not unusual for someone to fall prey to an illegal money lender or predatory lender. These malicious lenders lend money legally or provide predatory loan terms.
The good news is that there are warning signs you can watch out for! Take a look at these common warning signs to avoid dangerous and violent loan sharks.
| Warning Sign | Description |
| No Paperwork | Loan sharks often do not provide any formal documentation for the loan, leaving borrowers without legal proof of their debts. |
| Extremely High Interest Rates | They typically charge an exorbitant interest rate, far above what is charged by legal lenders. |
| Vague Terms | The terms of the loan, including the interest rate and repayment schedule, are often unclear or change without notice. |
| Threats or Violence | Loan sharks may use intimidation, threats, or even physical violence to enforce repayment. |
| Taking Personal Items as Security | They might ask for personal items like passports, bank cards, or valuables as collateral. |
| Refusal to Provide Information | A reluctance or refusal to provide clear information about the lender’s identity and legal status. |
| Pressure to Borrow More Money | They often pressure borrowers to take out additional loans or to ‘roll over’ existing loans into new ones. |
| Harassment | Persistent and aggressive contact or harassment for repayment, often ignoring agreed-upon schedules. |
| No Credit Checks | Loan sharks typically do not perform credit checks. A lack of background checks can be a sign of illegal lending. |
| Illegal Collection Practices | They may use illegal methods to collect debts, such as entering your home without permission or taking goods unlawfully. |
Steps to Report a Loan Shark
If you’ve encountered a situation where you need to report a loan shark, it’s important to know the right steps to take. Dealing with illegal lending can be intimidating, but remember, you’re making a positive move to protect yourself and others.
Here’s a straightforward guide to help you through the process:
- Gather Information — Collect as much information as you can about the loan shark. This includes their name, contact details, and any records of transactions if you’ve borrowed money from them. Don’t worry if you don’t have everything; just gathering what you can is a great start.
- Contact Authorities — In many countries, there are specific agencies dedicated to dealing with financial institutions that lend money illegally. Reach out to your local law enforcement or financial regulatory authority.
- Seek Legal Advice — If you’ve borrowed money from a loan shark, it might be helpful to seek legal advice. A legal professional can guide you on how to deal with any debts or agreements you’ve entered into.
- Follow Up — Stay in touch with the authorities to follow up on your report. Your ongoing cooperation can be crucial in dealing with the loan shark effectively.
What Are My Funding Options To Avoid Working With Loan Sharks?
Personal loans are usually an option available for those with bad or poor credit when borrowing money. Depending on your financial needs, there are personal loans in the form of secured or unsecured loans. An unsecured loan uses the borrower’s credit history to determine loan credentials, while a secured loan uses collateral.
There are long-term and short-term lenders who offer a variety of personal loans. Take a look at some of the most common options below. Chances are, you will be able to find a lender who will work for you much better than any loan shark could!
Installment Loans
An installment loan is a flexible personal loan that usually has adjustable loan terms and a competitive interest rate. Unlike other funding options, installment loans give borrowers the financial freedom to pay off their loan early without including any balloon payments or pre-payment penalties.
An installment loan is also unsecured, meaning borrowers do not have to put up any form of collateral in order to get approved. Instead, installment lenders look at credit history and other financial information. However, don’t be discouraged from applying for installment loans if you have a poor credit history. Since these loans are so flexible, loan amounts and individual payment plans are available for people with both high and low credit scores.
Payday Loans
Payday loans are small-dollar loans that usually come with very high-interest rates and short repayment terms. Since these small loans are typically on the lower side, payday lenders often expect full repayment within a couple of weeks. If you are budgeting with irregular income, you may find a payday loan a colossal inconvenience.
Borrowers who work with a payday lender and need more time to pay often find themselves in a situation where their monthly payment becomes unmanageable. The high-interest rates that come with these cash advance loans can actually cause the balance to increase some months! So, unless you can repay your payday loan quickly, you may want to consider other funding options.
Car Title Loans
Title loans are a type of secured personal loan that requires the borrower’s vehicle title as collateral. While you repay a car title loan, you get to keep your car to drive like normal, but the lender will sign onto your vehicle title as a lienholder. This means that your title loan lender holds legal ownership of your vehicle and has the right to repossess it if you default on your loan.
If you are considering a car title loan, you should be prepared to pay higher interest rates. Similar to cash advance loans, title loans are also meant to be short-term loans paid back within a relatively short amount of time. If you don’t pay back your title loan quickly, you may also find yourself in a situation where your loan payment increases month-to-month.
Credit Card Cash Advance
As an alternative to cash loans, you may be able to utilize the cash advance feature on your credit card. Almost every credit card has a feature where users are able to get a cash advance up to their credit limit.
Keep in mind that if you request your total credit limit for your cash advance, you will be unable to use your credit card for the rest of the month. But, credit cards are revolving lines of credit, which means you will be able to use your card and withdraw more money after your next monthly billing cycle.
Secured Loans
You may qualify for certain secured loans if you have collateral with equity. Title loans and home equity loans are perhaps the most common types of secured funding. With a home equity loan, an appraiser would come to your property and give you an estimate on how much it’s worth. The borrowers would then put their house up for collateral in exchange for funding.
Suppose you are having trouble keeping up with your original mortgage payment. In that case, you may be considering getting a second mortgage via a home equity line of credit. Just keep in mind that if you fail to keep up with your loan payments, you are at risk of losing your home entirely.
Brokered Loans
Brokers are not direct lenders, although they can recommend creditors that lend money legally. Borrowers who are new to finances and the lending industry often turn to loan brokers because they think that’s how they’re going to find the best deal. But, you may want to work with an online lender directly. Financial institutions like brokers may only be recommending a lender to you to receive a commission for themselves.
Credit Unions
Another alternative to working with loan sharks is working with a credit union instead. Credit unions lend money legally and usually have both large and small loan options available to people who fit certain qualification requirements. Furthermore, credit unions are nonprofit organizations, meaning they are more likely to cater to borrowers’ needs.
If you meet the criteria for funding via credit unions, you could take advantage of special interest rates, individualized payback terms, and even refinancing perks! But, if you fail to meet even part of the eligibility requirements with the credit union, chances are you will unfortunately not receive approval to borrow money.
Do I Need a Bank Account To Borrow Money?
Not every lender will require their applicants to have bank accounts to borrow money, but some will. If you do not have a bank account, now may be an excellent time to get one. Those looking to save money and keep their finances organized almost always have a checking and savings account.
When you complete the bank verification process during the application process, the lender can send your approved funds directly to your checking account. Direct deposit is by far the fastest way to receive your loan money.
Can I Get Personal Loans If I Have a Bad Credit Score?
Some bad credit borrowers may think their only option is a loan shark, but thankfully this isn’t the case! Thanks to the versatility of personal loans, people with both high and low credit scores have the opportunity to get approved for funding.
To understand bad credit loans, it’s essential to be familiar with what a credit score is and how they impact your loan. A combination of factors and behaviors regarding your finances help determine your credit score. Behaviors like how on time you are with making payments, how often you apply for credit, and more can affect your credit score. For example, if you have trouble staying on top of due dates and have a lot of missed payments on your record, this behavior may have a negative impact on your credit report.
There are three major credit bureaus that record your credit report information and give it to inquiring parties when they perform credit checks. Three main credit bureaus are Experian, Equifax, and TransUnion.
To stay on top of your credit score, you may want to perform soft credit checks often, so you’re always familiar with your score. When you have a general idea of the score lenders will see when they perform their credit checks, you can better understand your loan details. For example, your credit score will help determine payback terms, interest rates, and how much money you may be approved for.
Frequently Asked Questions About Loan Sharks
A loan shark is an illegal money lender who often lends money at very high interest rates and may use threats or violence to collect debts. They are not regulated by the financial authorities, making them a risky option for borrowing money.
Look out for lenders who don’t provide paperwork, use threats or violence, charge extremely high interest rates, or demand items as security. These are common signs of a loan shark.
Borrowing from a loan shark can lead to unmanageable debt due to high interest rates. There’s also the risk of harassment or violence if you struggle to repay.
Yes, the Illegal Money Lending Unit works to protect individuals from illegal lenders. An Illegal Money Lending Unit targets lenders that provide illegal lending services. If you’re dealing with a loan shark, you can report them to the Illegal Money Lending Unit for help.
If a loan shark’s threat makes you feel unsafe, contact the police immediately. It’s important to remember that loan sharking is illegal, and you have legal protection.
Since loan sharks are illegal lenders, any money you owe them is not enforceable in court. However, it’s best to seek advice from legal experts or an Illegal Money Lending Unit that deals with illegal lending.
Consider borrowing from legal lenders like banks, credit unions, or online lenders. These institutions offer regulated and safer credit market options.
Credit unions are legal, regulated entities that often offer more favorable terms and interest rates compared to loan sharks. They are community-focused and prioritize the welfare of their members.
Loan sharks may resort to intimidation or violence to recover their money. It’s crucial to seek help from authorities or organizations dedicated to dealing with illegal lending.
No, loan sharks operate outside the legal framework, so they can’t legally repossess your property. However, they may use threats or violence, so it’s important to seek help if you’re in this situation.
The Bottom Line on Loan Sharks From CreditNinja
Loan sharking is the practice of illegal lending with unfair, and predatory repayment terms. An illegal lender will typically lend money with a super high interest rate to someone that cannot qualify to borrow money from traditional options.
But the good news is that there are loan shark alternatives! If you are dealing with financial troubles, consider applying for a CreditNinja personal loan. Fill out the simple online inquiry form today to see if you qualify for personal loans in Minnesota, MN and other cities!
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