Loan sharks are people or businesses who loan money at extremely high rates of interest. They are unlicensed, so any lending they do is illegal. Loans from loan sharks are often designed so as to be impossible to pay off. Often loan sharks use coercive and abusive tactics to get their borrowers to pay, including replacing smaller loans with larger ones with even worse terms, harassing their borrowers and threatening further abuse, or even resorting to violence to get their repayments.
Don't borrow money from a loan shark under any circumstances. Ascertain whether a lender is a loan shark by investigating his license and by checking the rate of interest he is demanding. If he demands an exorbitant interest rate, especially one with weekly payments, and if he can't prove any government accreditation, you are probably dealing with a loan shark.
If you need to borrow money quickly and do not have good credit to make borrowing easy, seek help from family or friends before resorting to a loan shark. Some nonprofit organizations make small loans to people in need, and are highly preferable to dealing with a loan shark.
Try a payday lender if absolutely necessary. A payday lender makes small loans against your next paycheck, taking a postdated check in exchange. The interest will be exorbitantly high, but because the payday lender is legal, you should not have to face potential threats and abuse if you have difficulty paying. Because unscrupulous loan sharks sometimes pose as payday lenders on the Internet, make sure you check the accreditation or license of any payday lender you want to deal with.
Report your illegal loan to the appropriate authorities. In the United States, lending is regulated by myriad agencies at the federal and state level, so you will have to find the appropriate state office to file your report. In the United Kingdom, contact your local Trading Standards office for help in dealing with your loan shark.
Stop making payments on your loan. Because your loan shark is unlicensed, he cannot legally lend money at interest. You are therefore under no legal obligation to repay your loan from him.
File a police report against your loan shark if you are threatened or harassed in any way. Keep track of any threats, including language of the threat, and time and location in which the threat occurred. Make recordings of threats if possible. Document any action taken against you, particularly any actual violence, and pass all documentation on to the police immediately. Ask for police protection if needed.
Seek help from a licensed credit counselor to find a way out of your financial debt without having to resort to dangerous and illegal loan sharks. Legitimate credit counselors can help you devise repayment plans. They can even help get your creditors to change their repayment terms and accept less than 100 percent of the amount you owe.