Many people think that there are only two types of people you can borrow money from, banks and money lenders but in fact there are three. There are of course the banks that will usually charge you a lower rate of interest and then there are licensed money lenders whose rates of interest will probably be a little higher than the bank’s and then thirdly there are the un-licensed money lenders and they are the ones which have earned the name ‘loan sharks’ as their interest rates are usually very high, excessively high in many instances. A licensed lender, unlike an un-licensed lender, has regulations they have to stick to in order to keep their license and as those regulations include interest rates that can be charged, their interest rates are usually fairly reasonable and their repayment plans are equally reasonable.
With no regulations governing them though, the un-licensed lenders tend to charge extremely high rates of interest and may even give unreasonable repayment times. For this reason most people try and avoid getting loans from these ‘loan sharks’ but as it is rare for them to turn anyone wanting a loan away, those people that do not qualify for a loan from either a bank or a licensed lender, have no other choice but to use them when an urgent need for funds arises. Another time someone may use one of these loan sharks is if they do so by accident, not realizing that they are in fact un-licensed. To help avoid instances of accidentally going to an un-licensed lender, Singapore has a website which lists all the licensed lenders so anyone seeking a loan from anywhere other than a bank, can check the list to find an appropriate lender and at the same time, ensure the one they go to is licensed.
Unfortunately, similar websites are not found in all countries and so in those countries without such a website, people should be very careful with whom they approach for a loan. A bank is probably still the best place to go for a loan but unfortunately their criteria which must be met in order to have a loan approved, is sometimes too strict to afford everyone a loan. Also as the loan procedure with a bank can take several days, if you need the loan quickly, you may opt to use a licensed money lender instead. Licensed money lenders do also have their criteria which people should meet in order to have a loan approved but usually their criteria is easier to meet than a bank’s. An un-licensed lender may not have any criteria to be met and so are always willing to give a loan but that is one of the reasons why their interest rates are so high; all too often, they have to collect the loan payments. Unfortunately too often these interest rates are so high, people may even have to apply for a second loan to help them pay off the first, creating an almost endless debt.