Loan Shark or Fair Lender?

Loan Shark or Fair Lender?
  • Opening Intro -

    An individual that loans money to another person for an exorbitant fee is sometimes known as a "loan shark."

    Unfortunately, the term is often misused to describe legal lenders that charge rates that are above what most of us think are reasonable.


A loan shark traditionally has described an individual that has a criminal tie, a person who is part of an organized crime unit such as the mafia. Regardless of the term used, you can protect yourself from unfair and even dangerous lending practices by staying informed.

Predatory Lender

Perhaps the best phrase to describe anyone that charges exorbitant interest rates on loans is “predatory lender.” A loan shark typically threatens violence if the debt plus interest is not recovered on time. A lender, such as payday firm, may not threaten personal violence, but could cause you financial havoc if you do not pay your loan back on time.

If you find yourself doing business with an individual you deem is a loan shark, you should call the police. Make a complaint and explain what threats were made. You may also need legal advice if the debt is legitimate. Sometimes, the threat of violence is a “he said/she said” issue where one party alleges one thing, and the other something else.

Payday Loans

A huge fee or interest rate on a short term loan does not make that loan illegal. Loan rate limits are subject to state control even if the loan was completed online. In Illinois payday loan lenders can charge an annual percentage rate (APR) no higher than 99 percent. This amount still seems excessive, but it is far lower than the 300 to 400 percent rate charged elsewhere.

If you believe that you are a victim of predatory lending, contact your state’s Office of the Attorney General for help. You may be able to file a complaint and have your loan terms rewritten. If a crime has been committed, your state may prosecute. Provide the documentation required to file your case.

Federal Government

The US federal government also has a stake in unfair lending practices. Through the Federal Trade Commission (FTC), consumers can file a complaint. Although the FTC does have jurisdiction to handle specific cases, they are an excellent reporting bureau for state prosecutors to determine whether certain unfair lending patterns are evident across the country. Make your complaint known to help your fellow citizens avoid being ripped off.

Lending Considerations

If you find yourself working with a predatory lender, you need to examine what you are doing that has you going to such a lender in the first place. If you need credit counseling, then get it. Most counties provide credit counseling to help people manage their finances including their debt better.

Lastly, keep in mind that if the loan was completed legally, your case may be a weak one. However, keep documentation of all borrowing where the rates you paid far exceed the normal loan rates charged by your bank or credit card provider.

See AlsoHow Payday Loans Work


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Categories: Consumer Financing

About Author

Matthew C. Keegan

Matt Keegan is a freelance writer and editor as well as publisher of "Matt's Musings", his personal blog. Matt covers campus, consumer, business and financial topics on various websites and blogs, and has been published in the "Houston Chronicle", "Sam's Club Magazine" and "Wisconsin Golfer".