4 Tips for Avoiding Loan Sharks

Loan sharks are lenders that target borrowers with bad credit, offering loans that are deliberately designed to enrich the lender at the borrowers' expense. They prey on borrowers' desperation, offering the borrower financing when they are seemingly out of options. While such loans will provide short-term relief, the long-term consequences are catastrophic. You can avoid becoming the victim of lone sharks if you carefully follow the tips listed below.

1. Be Wary of Unsolicited Offers

Loan sharks often actively seek out potential victims using public records. They may look for bankruptcy sales, foreclosure and other signs of financial distress in your area, look up your contact information in public directories and send you letters and/or e-mails, offering you loans and strongly implying that you should act quickly or you will miss this opportunity. Oftentimes, they phase their offers in general terms, hoping that you would be curious enough to find out more.

This is not how the legitimate lenders operate. Legitimate lenders take out advertisements and wait for you to come to them. If you ever receive an unsolicited loan offer, feel free to discard it without further thought. In some cases, the lenders will persist. Try your best to ignore them - if you feel like their offers escalate to the point of harassment, report them to the police.

2. Check the Lenders' Records

In many cases, loan sharks masquerade as legitimate lenders, hoping that you will not do any research beforehand. That is why you should carefully check the public records of any lenders you may be considering. First and foremost, you should look up the lender's name on Better Business Bureau's website. If the Better Business Bureau has no records of the lender, or the their records indicate a litany of complains and bad business practices, you are better off looking elsewhere. You may also want to look up the lender's name at customer advocacy websites.

3. Check the Contact Information

Loan sharks will not hesitate to provide you will fake addresses or direct you to websites that make them seem more legitimate than they really are. Check the address' physical location and take everything you see on the lender's website with the grain of salt. Having a name of a legitimate lender does not guarantee legitimacy - graphics and logos can be easily faked, and web addresses can be misleading.

4. Insist on Clear and Direct Answers

Loan sharks will try to avoid discussing their loans in detail, boasting about the positives while downplaying or omitting the negatives. In many cases, they will offer vague explanations about the terms they offer and how that you won't question them. As a borrower, you have a right to ask the lender any question about any aspect of the loan. Be sure to ask about the value of their interest rates, what type of interest rates they are, how long you have to repay the loan, what kind of penalties it contains and what kind of closing fees you will have to pay. You also have the right to see the loan contract before you sign it. If the lender refuses to honor your request or tries to avoid answering questions, look elsewhere.

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