How To Spot Loan Sharks and Important Safety Precautions?

A loan shark lures naive consumers looking for urgent loans who may sign up for unscrupulous terms or unregulated loans due to a lack of awareness or desperation. In the short term, it may seem like an easy financing solution. However, in the long term, it can lead to severe consequences. 

These are instant loan providers offering cash with zero paperwork and high interest rates. 

They may disguise themselves as digital lenders but there are red flags that you can spot. With such an illegal money lending option, you could encounter many hassles. So, taking measured precautions is essential. 

Read on to learn more about private loan sharks, how to identify them and take preventive measures accordingly. 

What is a Loan Shark?

Also known as money sharks, they are lenders who engage in predatory lending practices. They usually lend money or offer loans at high rates of interest without proper paperwork. Along with an informal application process, they may exhibit unlawful behaviour during the repayment window. 

Consumers often fall for these traps when they don’t have other options available. If they don’t meet the eligibility criteria of an authorised lender, loan shark loans may seem like the only option, especially during emergencies. 

Signs of a Loan Shark

Here are a few signs to watch out for and spot loan sharks online. 

• Any marketing about a loan on 0 interest without paperwork
• Offering cash loans rather than bank transfers
• Refusing to provide any loan information, terms or charges
• Charging an interest rate that is higher than other players in the financial market
• Having no official license, not being regulated by the RBI or not following the RBI’s Digital Lending Guidelines 
• Asking for security that is higher in value than the loan amount 
• Not asking for your credit score or checking your credit report 
• Use of aggressive tactics that force you to take action whilst not giving you time to consider the offer 
• Not having a secure website or app 

These are some of the most common practices that will allow you to understand whether your lender is a loan shark. Borrowing money from them can jeopardise your finances, so make sure you do your research. 

Reasons You Must Avoid a Loan Shark

Initially, such lenders may seem friendly or understanding of your situation but dealing with them can lead to disastrous consequences. They include:

• Extremely high interest leads to debt accumulation
• Total cost of borrowing exceeds the borrowed amount by a huge margin
• Unwanted harassment and threats of violence
• Impossibly high hidden fees that may damage your financial health 
• No option to make a full settlement to avoid interest
• Higher chances of losing collateral, if any 
• Huge pressure to borrow more money

Safety Measure to Avoid Loan Sharks

Such lenders can bring a lot of unnecessary stress into your life. In addition, they can affect your finances, which may take a long time to recover. Here are some of the precautions you need to take to avoid such lending scams.  

• Do your research before filling up the loan application or sharing your personal data
• Ensure the lender maintains transparency by mentioning all details on its official portal 
• Read online reviews about the lender 
• Apply with a reputable lender or digital entities that have RBI approval
• Compare the interest rates before you apply
• Look out for high upfront fees
• Avoid lenders with high-pressure sales tactics 
• Don’t give the lender any bank information before you are sure you want to apply
• Report the company if you find anything suspicious

How to Report a Loan Shark?

To report such unscrupulous lenders, you can avail of the following options:

• File a police report
• Contact the cyber crime cell of the government online or on-call 
• Email the Reserve Bank of India (RBI)

Make sure that you can share records of the loan, interest rate and emails or recorded calls with these agencies. 

Loan shark loans can disrupt your personal life as well as a huge financial loss. Since precaution is better than cure, it is important to choose a trusted lender to avoid any hassle. Fibe can be a secure option for you to get an instant loan of up to ₹5 lakhs for umpteen needs. 

With just a few clicks, you can opt for a personalised Fibe Instant Personal Loan with affordable interest rates and no hidden charges. We also give you flexible tenure and the option for foreclosure without any penalties. You can use our Personal Loan App or register on our website to apply for the required funds without much hassle.  

FAQs on Loan Sharks

Is loan sharking legal in India?

No, loan sharking is an illegal money lending option in many jurisdictions, including India. Loan sharks operate without licenses. They also do not adhere to any rules and regulations of the financial sector or digital lending laws. If you come across such a lender, make sure to report them. 

Why do people use loan sharks?

While trying to avoid them, consumers may fall prey to their tactics via phone calls or other means of communication. During desperate circumstances, such lenders may seem like the only option. However, it is always better to check a lender’s licence and authenticity to have a hassle-free experience. 

Why should you avoid loan sharks?

Since their interest rates are very high, borrowing from loan sharks often leads to financial exploitation. They also use unwanted harassment and threats of violence, which can affect your mental and financial well-being. 

What is another name for a loan shark?

Loan shark loans have many names and their approach is called predatory lending. These lenders are also called money sharks.