Loan Sharking
What It Is:
Loan sharking refers to predatory lending practices by individuals or organizations that charge high interest rates.
How It Works/Example:
Loan sharking involves taking advantage of the borrower's weak credit or collateral condition. Typically, when a borrower has no option to secure a traditional bank loan, a loan shark does not usually require collateral for a loan, a bank account or even a written loan agreement. While this may sound good, at first, a loan shark will charge very high interest on the loan, which makes it very difficult to pay the loan back on time, or at all.
Why It Matters:
Loan sharking is usually the province of organized crime or otherwise usurious lenders. At best, borrowing under such terms is not in a business's or individual's long term best interest. At its worst, such borrowing can be dangerous.
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Cached on May 22, 2012, 3:52 pm