Struggling with money is quite a familiar situation for most people, and many take out a loan when an unexpected situation arises. However, getting a personal loan from a bank or financial institution isn’t that easy – one must have a good credit score and all the necessary documents for loan approval, making it impossible for some.
Their only option is to borrow money from a loan shark who offers high-interest loans with strict terms of collection upon failure. While this might serve as a short-term solution, it can often lead to long-term pain for those who are desperate and overlook the subtle signs of a scam.
Loan sharks are famous for taking advantage of people with bad credit. For your financial health, it’s essential to avoid these lenders at all costs. To recognize these loan scammers, here are some key signs to be aware of.
Lenders Who Come To You
Loan sharks usually get the contact details of their potential victims through public records. Be aware of the email or text message from a stranger offering a loan and just ignore it! Legitimate lenders never contact you unless you contact them first.
Advance Fee Required
Legitimate lenders may charge an application fee, but the cost is usually deducted from the loan amount. If any lender asks you for money in advance of receiving a loan, it’s most likely a scam. It is also against the law to promise to issue a loan in exchange for a fee.
Ask For Collateral
Loan sharks sometimes ask borrowers for card numbers and PIN details along with with other confidential bank account information; or they may request valuables, driver’s licenses, passports and other ID as collateral before lending money.
This is their way of pushing you further into debt – if you fail to pay the loan on time, they can take out more loans on your behalf to pay the previous loan. And if you shared your ATM and bank details, they may withdraw more than what you are liable for!
No Credit Agreement
Apart from family or friends, no professional will give a loan without a clearly stated written agreement. Loan sharks don’t provide written contracts specifying the terms of the loan, as this makes you more vulnerable, allowing them to add extra charges at any time – and without a legally binding contract, you’ll have no grounds to complain!
Desperation can cause people to make rash decisions! If you ever find yourself in financial distress, always be sure to use a licensed lender who provides a written contract with transparent terms and conditions.