Loan sharking is the practice of lending money to desperate people at extremely high and illegal rates of interest. Loan sharks, or shylocks, take advantage of those people who can’t get loans from banks or other lending institutions, which are the legal sources. Loan sharks appeared when people needed money they didn’t have, providing them with their services in exchange of a fee. They claim to be the help to a person in hurry. These sharks tend to attack desperate people wanting more money than they can access to, like illegal immigrants, compulsive gamblers, single parents, elders, or white-collar executives.
In the popular belief loan sharks are associated to gangsters and organized crime. The fact is that this practice is a good source of income for criminals and their families. It’s a very lucrative business because in matter of weeks lenders receive the return to their investment in a very good rate. The interest rates they handle are sometimes of up to 20% per week, and some cases even more. In an investigation held in New York, they discover that a loan shark syndicate was getting 3000% annual interest. Dallas gangsters in turn charged only 585% annual interest. These were ghetto-rates. Shylocks would be more competitively priced for corporate white-collar businessmen; with rates of around 5% weekly range.
Modern Day Predatory Lending
The predatory lending is an unethical practice that some lenders use, which includes the use of tactics that are not legal. Their methods consist in the use of confusing language, unfair loan terms, charge of hidden fees and more. As far as they keep borrowers in debt to them, they will continue to make money. People like minorities, elders, low-income and poor credit are the ones they search for, but actually no one is safe from interbreed with them. The business of predatory lenders is to trick people who want more than they can have and convince them that the loans are affordable.