Loans have become an integral part of our lives, and with that, loan providers have surfaced to cater to this need. However, not all lenders have the best interest of the borrowers in mind. Some of the most dangerous and frustrating loan providers are called loan sharks. These unscrupulous characters can be commonly found in the Philippines, and you should be cautious to ensure that your hard-earned money is safe and sound.
What is a Loan Shark?
A loan shark is a person or company that offers loans at extremely high-interest rates and uses the threats of blackmail to collect debts.
In the Philippines, the most common examples of loan sharks are the infamous 5-6 lenders, sangla ATM lenders, and other informal lenders. These loan sharks sneak in hidden charges and have short repayment periods, making it difficult for the borrower to come up with enough funds to repay their loans.
They usually prey on vulnerable people in desperate circumstances, individuals who have low or no financial literacy, or even those who have been rejected by formal lenders.
How to Spot a Loan Shark?
Loan sharks are not only found on the streets of the Philippines but also in online spaces. Here are some ways to Spot a Loan Shark:
1. Loan Sharks have High-Interest Rates
Loan sharks often offer loans at ridiculous interest rates even higher than what banks and other private lenders offer. This means that borrowers would have to pay a considerable amount of fees on top of the principal amount every repayment period.
2. No Background Checks
Loan sharks do not conduct any background checks on the borrowers. They already rely on predatory practices to get their money back. There is no need for them to check the borrower’s credit standing or income anymore when their high rates and fees are already predetermined.
3. Hidden and Excessive Charges
Loan sharks may impose hidden fees on the borrower. They may include excessive charges like document prep fees into the loan. Loan sharks take advantage of having no contracts to sneak in these fees, often without the knowledge of borrowers.
4. No Written Contracts
Loan sharks provide no written contract or document that specifies the terms and conditions of a loan. This makes it easier for them to charge high interest rates and other fees. Without a formal or legally-binding contract, it is challenging for borrowers to go after loan sharks or file a complaint against them.
5. Personal Collaterals
Loan sharks usually require personal collaterals like ATMs and bank accounts. Lenders who provide sangla ATM loans ask their borrowers to hand over their ATM cards as collateral for a loan. This is a risky arrangement for the borrower since it would also require them to share their ATM card PIN and other bank information.
6. Unethical Debt Collection Practices
The most dangerous aspect of a loan shark is their resort to unfair debt collection practices, sometimes bordering on abusive. Loan sharks use threats, blackmail, or violence at the expense of a borrower’s privacy and peace of mind.
Online Lending Harassment in the Philippines
Since the pandemic in 2020, loan providers, including loan sharks, have shifted to using online lending platforms to reach their customers better. This opened another opportunity for them to conceal their sinister goals. Lending companies may call their clients following a failure to pay on time, but there is a limit to what they can say or do to their clients. Home visits are normal when collecting debts from clients, but threats of physical harm and damage to personal property should not be part of a “peaceful” home visit.
Moreover, online fraudsters and scammers pretend to be legitimate online banks or lending businesses to acquire information, account details, or payments from their victims.
How to Fight Loan Shark Harassment?
Here are some ways to fight loan shark harassment:
- Only take loans from banks, the government, or licensed private lenders. Check their legitimacy by verifying their operating licenses, list of SEC registered online lending companies or applications, and other business permits.
- Keep records of transactions and always ask for receipts to protect yourself. It is one of the best ways to safeguard yourself from loan sharks or any form of loan.
- Never borrow money with your ATM card/s as collateral. This puts you at risk of identity theft and unauthorized bank transactions, especially if you fail to make a repayment on time.
- Always pay through official payment channels of banks or online lending applications. Loan sharks are not the only ones you have to be wary of. You also have to be careful of the well thought out schemes of online frauds and scammers.
- How to fight loan shark harassment in the Philippines?
You may file a report and ask for assistance from SEC (Security and Exchange Commission).
- Where do you report online lending harassment in the Philippines?
Prepare evidence of the harassment and send it to the appropriate agency. You may check the types of violations such as Cybercrime (NBI), violations of the Online Lending Act (SEC), and Data Privacy violation (NPC).
- Do you have to pay loan sharks if you don’t have the money?
Borrowing money is a responsibility. Whether you borrow money from your friend, bank, or loan shark, you are obligated to pay what you borrowed. However, it does not give lending companies the right to harass, abuse, or disregard your rights as a person.
- Can you take a loan shark to court?
Yes, you can. Loans and interest rates are strictly regulated in the Philippines. If any of these lenders violate these laws, you may file a complaint and take them to court.
- Is a loan shark illegal in the Philippines?
Loan sharks are illegal and unregulated lenders. Keep yourself safe from loan sharks by only choosing registered, licensed, and legitimate lenders.
To ensure secure loan transactions, opt for reputable lenders such as banks and the legit online loan apps listed below. Rest easy knowing you won’t face predatory interest rates, hidden charges, or collateral requirements, and that your privacy will be respected.
Select online loans that come with the best terms and conditions, ensuring a card without any rejections. Numerous companies provide an initial loan at 0% interest and ensure swift money transfers, making them perfect for urgent financial needs.
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