Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

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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