‘Loan shark’ is a term used for a private or illegal moneylender who offers loans to those borrowers who have either exhausted their conventional credit options or are simply not eligible to apply for a loan elsewhere. Loan sharks, who could be individuals or group entities, are notorious for taking advantage of desperate borrowers. They often charge exorbitant interest rates, lay out unfair terms regarding late payment penalties and such, and don’t refrain from resorting to threats and intimidation to collect their debts.
In most cases, especially in the UAE, this term is used for private lenders who are not authorized to offer loans unlike a bank or licensed finance company. In fact, law enforcement authorities in the UAE encourage residents to report such illegal lending activities. However, most loan sharks fly under the radar and quickly become the worst financial nightmare for gullible borrowers’ who fall into their trap.
The Souqalmal.com team explains why you must steer away from loan sharks and how you can get out of their trap as soon as possible.
Threats & harassment – Debt collection tactics used by loan sharks
Illegal moneylenders use all sorts of scare tactics to intimidate borrowers into paying up. They could land at your workplace and threaten to report your overdue debts to your manager. They would call you incessantly and show up at your doorstep at odd times.
Their threats can quickly cross over into illegal territory as many of these lenders wouldn’t shy away from threatening you and your family with physical harm. And another tactic that’s quite typical of loan sharks in the UAE, is that they hold your passport against your will to prevent you from leaving the country without repaying them. Many moneylenders use this tactic to coerce borrowers to bend to their will and agree to terms that are highly unfavorable.
How to avoid falling prey to a loan shark
They may be known as lenders-of-last-resort, but it’s best to stay as far away from private moneylenders as you can. Borrowing from them will only make your financial situation go from bad to worse.
If you’ve run out of options and have exhausted all legal ways to borrow money, you should take a long hard look at where you can cut back and save more instead of going down the debt route. It may even be a good idea to tap into your investments and liquidate some assets to get access to the cash you need. Approaching your close relatives or employer for a short-term interest-free loan could also be looked at as an alternative.
Borrowed from a loan shark – What to do next?
If you’ve ended up borrowing from a loan shark, you must direct all your efforts towards repaying them as soon as you can and closing the chapter on this risky debt. But it is also important to be aware of the legalities surrounding the subject so you don’t suffer at the hands of these illegal moneylenders.
Since loan sharks are not licensed by the UAE Central Bank to provide loans to residents, they don’t have a legal right to recover the debt. This is exactly why these lenders use threats, such as maligning your reputation at work, to pressure you into repaying.
However, if you’re facing threats of violence from such a lender, you shouldn’t be afraid to approach the police. In case the lender has confiscated your passport, you can get legal help to recover it. Just because the lender has your passport, you shouldn’t have to endure their mental harassment in silence.