When you are borrowing money from legitimate financial institutes and banks, they will always check your credit history to evaluate your past repayment performance. This makes it very difficult for people with bad credit scores to get loans from legitimate finance organizations.
As a result many people who have bad credit scores tend to turn to illegal money lenders to borrow money at really high interest rates. These money lenders are known as loan sharks. A loan shark can be a person or body that gives unsecured loans at high interest rates to individuals. This lending is illegal in the US but unsecured loan shark loans are quite rampant.
Due to high interest rates of unsecured loan shark loans, many borrowers find it difficult to repay the loan amount and this often leads to blackmail or threats of violence. In addition, the terms of the loan are very unfair towards the borrower. The interest rate charged by loan sharks can be as high as 12 percent a month which works out to nearly 144 percent Annual Percentage Rate (APR)! This means if you take a $5,000 unsecured loan shark loan, you will need to pay $600 each month just for the interest. However, if you pay just $600 a month, you will never clear up the loan amount.
It has been seen that many borrowers usually borrow a small sum of money but end up paying double or triple the original sum in interest. Because of this many borrowers who take unsecured loan shark loans run away or go into hiding as they fear the repercussions from the illegal lender who can take actions like blackmailing, putting scary items in the borrower’s home, making threatening phone calls and sending goons to recover the money.