What is a ready shark?
A lender is someone who – or an entity that – lends money at extremely high interest rates and often uses threats of violence to collect debts. Interest rates are generally well above an established legal rate, and often lending sharks are members of organized crime groups.
Shark lenders charge borrowers interest generally well above any established legal rate; even in the event of a serious financial crisis, there are alternatives.
How a lender shark works
A lender can be a person in a personal or professional network offering loans at high interest rates. They can be found in underbanked neighborhoods, on the Internet or via personal networks. Their funds generally come from unidentified sources and they work for personal businesses or unregistered entities.
Shark lenders do not require background checks or credit reports. They will lend large sums of money with the intention of generating high interest in no time. Loans to shark lenders charge interest rates well above any regulated rate. For example, a lending shark could lend $ 10,000 to a person with the condition that $ 20,000 be repaid within 30 days. These lenders can also often request debt repayment at any time, using violence as a means of forcing repayment.
In most cases, commercial transactions with a lending shark are illegal; it is better to look for other alternatives.
Key points to remember
- Shark lenders lend money at extremely high interest rates and often use threats of violence to collect their debts.
- They are often members of organized crime unions.
- Payday lenders are similar to shark lenders in many ways, but operate legally.
Payday loan sharks and other alternative lenders
Some payday lenders may approach the level of shark lenders, offering loans at extremely high interest rates for short periods. However, these rates can be completely legal. Standard usury laws generally dictate the maximum interest rates that a lender can charge in each state, up to around 45%. Payday lenders often have exceptions, charging annual interest rates of up to 400%. They can offer such high rates due to the special provisions offered by state governments. Shark lenders generally charge higher rates than those charged by payday lenders.
Payday lenders are a legal form of high interest loan offered to borrowers. These are generally registered entities that follow standard credit application procedures and request personal information for a credit check. Payday lenders also require proof of employment and income. Payday lenders generally base the capital offered on the income and credit profile of a borrower.
Although payday lenders are not known for their violent debt collection tactics, they do offer short term rates on payday loans with extremely high interest costs, making repayment difficult for a borrower. Generally, payday lenders will follow standard collection procedures in the event of default, reporting missed payments and defaults to credit bureaus.
Other alternative lenders have appeared on the credit market to offer credit alternatives to individuals and businesses. These lenders offer alternative products comparable to traditional loans. Many of these loans will have lower borrowing standards, which will make credit more affordable for a larger portion of the population. The loan application procedures will generally be similar to standard conventional loans. However, loan applications are usually automated and lenders are ready to work with borrowers in the event of a conflict. These lenders can offer different principal amounts and interest rates to different borrowers.