We have all heard the term “loan shark”. Now what or who is a loan shark? A moneylender who charges exorbitantly high rates of interest, usually illegally, is known as a loan shark. They are a dangerous breed and my suggestion is to stay as far away from them as possible. I will tell you why I think this way.

Their juiciest targets are those who are in some kind of problem and go for quick loans in the hope that it would be a short term affair which they can pay back and solve their problems. But it is never short term. It lingers on and on endlessly, ultimately bringing in total ruin.

Such borrowers are often found to posses something in terms of assets which the loan sharks can seize in case of default. And in 90 cases out of 100 they hound those who can’t pay with an eye to these assets. Such enormous pressure is put on them that often the borrowers have two options – sell off to pay or end their lives.

Every year there are too many reports of people surrendering to the failure of not being able to pay their debt to loan sharks and committing suicides. Family suicide cases were also rampant in 2014 and 2015 where farmers in several states had to succumb to the trap of these loan sharks. For India or for any other country, the problem of these loan sharks who provide loan to almost anyone, under conditions of very high interest rates, looms large.

What problems do the borrowers face?

 Firstly, the people who lend money have prior knowledge about the people who go to them, that for some reason they cannot get loans from a bank through proper banking channels or don’t know that they can get loans on easier terms than those from the loan sharks.

People not only borrow money for emergencies but sometimes also to make ends meet. There are others who try to set up small businesses for which they need capital. As these people usually do not have any collateral to put up against their loans, banks and financial institutions refuse to lend to them. So they have no other option but to turn to the loan shark for the necessary advance.

But little do they realize that no business can be set up by borrowing money at such unreasonably high interest rates.

Start out by being friendly and eager to help

Loan sharks start out by being friendly and eager to help you. They present themselves in such a way that it would appear they are there to help you. They don’t want any collateral, they don’t ask you to fill out endless forms, there is no formal agreement of the borrowing. But once they have you in their clutches, it is a different story altogether. They charge very high interest rates – there are stories of people who borrow a small amount and then spend the rest of their lives just paying off the interest. If you fall behind in your debt / interest payment, they threaten and intimidate you and your family members and even get violent at times.

They grab whatever little assets you have as payment for the unpaid amounts. Banks charge lower interest rates on loans and write-off parts of it if you cannot pay it back (though there have been instances of banks sending musclemen to recover debts). But these people are not considered eligible for bank loans and so have to depend on unscrupulous loan sharks.

Taking loans even to pay off existing debts

People not only borrow from these loan sharks to start businesses, get their daughters married or their sons educated, they also need to borrow to meet their day-to-day needs and very often even to pay off existing debts. This just drives them deeper and deeper into the pit of debt and poverty. They find it difficult to get out of this morass, their debts pile up, whatever little they possess gets forcibly taken away, they are attacked and beaten up and many just end up killing themselves when they find there is no way out. There are many such cases of suicides from being unable to get out of the evil clutches of the loan shark.

These are the kind of people that the loan shark approaches and takes advantage of their perilous situation. They are the worst kind of people who live by sucking the life-blood out of fellow human beings. The only way to deal with them is to not deal with them. They are evil and should be barred from running their exploitative trade.

How to get rid of loan sharks?

Firstly, if you are in serious need for money and the banks have refused it due to lack of criteria, look for money lenders who are licensed. They usually do not come up with such bad terms and hence are flexible in their proposals. Moreover, never succumb to fear and desperation if you find out your lender is unlicensed. In such cases you can even refuse to pay back the money to him and register a police complain for the harassment or abuse that you may be facing. In certain cases, this works well also for licensed lenders as they too cannot break the law and indulge in harassing you. This in many contexts helps you to buy some time.

There have been many places in India where the state government and activists have been able to raise awareness against money lenders. Arrests has been conducted based on police complains and in many areas the presence of such abusive intermediary have been completely obliterated.

But even today it is a big problem in India and serious policy changes from the part of the bank and the government needs to be looked into to do away with this problem once and for all.