The Dangers of Borrowing from Loan Sharks

Referred to as Ah Long in Malaysia and Singapore, loan sharks are individuals or an organisation who illegally lend money to those unable to seek loans from traditional financial institutions because of bad credit records. Most loan sharks approach people who have low income, habitual gamblers, and those with expired tourist visas or residence permits among others. People obtain loans to improve their financial situations; however, turning to illegal money lenders can have dangerous risks on borrowers that can put them in a position more drastic than being in debt.

Life Threatening

Loan sharks are notorious for enforcing unethical practices that can drive a person to commit suicide or that can endanger the lives of a borrower’s immediate family members and relatives. According to local authorities, there have been cases where the family members of a borrower were beaten.

Unethical Practices

One of the most common tactics of loan sharks is to write “O$ P$” (owe money, pay money) on a debtor’s property using red paint. Another common practice of Ah Longs is the hanging of pig heads outside a borrower’s property which marks the person as a loan defaulter. Debt collectors would also go so far as to set a house on fire, break into houses and steal items with the same value as the loan, humiliate a person in public, or threaten a borrower’s family and friends on social media to collect money from a debtor.

High Interest Rates

Loan sharks offer loans at exceedingly high interest rates, charging borrowers up to 100% in interest. Taking chances dealing with an illegal lender who offers high interest rates can bury a person deeper into their debt.

Short Repayment Term

Illegal lenders demandrepayment in the short term. Agreeing to repay a loan within a short period can add to the stress and pressure of having to pay promptly. If a person fails to repay the loan within the agreed period, the lender would assess high penalty fees.

If seeking loan from illegal money lenders pose alarming risks for debtors, then why do people deal with them? The convenience and ease of obtaining loan from unlicensed money lenders is the most notable reason why many people resort to loan sharks. In most cases, the only application requirement from borrowers is their identity card (which would later on be used to shame the debtor publicly). In addition, loan sharks also offer instant decision on loans for those who are in urgent need of cash.

Loans are made available by licensed money lendersin Singapore and other reputable lenders who takes careful, but fair consideration when lending to low income individuals or those who have low credit scores.