The term “Instant Cash Loan Sharks” should set off considerable alarm bells in most people’s heads – “sharks” being the key trigger here. These are companies which provide “easy” credit or loans to people who either don’t qualify for a personal loan through a reputed financial institution, or who have a shaky credit history, and are thus forced to approach loan sharks in securing a loan, often to pay off existing debt.
Loan sharks in South Africa are ever present, both in the form of online providers, but they also litter the less wealthy communities’ pavements, providing easy “walk-in access” to those without access to a computer or to the Internet.
A study on the micro lending environment in South Africa, conducted by the University of Stellenbosch, showed that in 1997 there were an estimated:
3500 formal microlenders, 2000 semi-formal micro-lenders and 25000 informal micro lenders in operation. (www.articlebase.com).
Although this was a number of years ago, the burgeoning size of the informal lending market is evidence of a sad reality in South Africa – clearly the demand for such a service is desperately high, putting those in need of the loans in a vulnerable position, and giving those providing the loans a dangerous amount of power.
Loan sharks traditionally make threats of violence, although this tends to stay more in the “walk-in” loan providers sphere, and is less prevalent with the online providers. Traditional loan sharks
need no collateral aside from the borrower and his family’s well being. (www.cashloans.org.za)
Employing “leg-breakers” has been and still is a common practice in the debt collection of loan sharks – often these brutes aim to “make an example” of someone who could not pay his debt, even if the amount in question is not particularly high. The result of this action is that the borrower is forced to come up with the money which he invariably does not have, encouraging further lending, theft or other crime in an attempt to keep himself and his family safe.
Clearly, getting into a situation with instant cash loan sharks is something not to be entered into lightly or with limited knowledge about the potential pitfalls. Unfortunately, however, “the sad reality is that those who were historically denied human rights and still languish at the bottom of the income heap as a result, have very limited access to credit” (www.iol.co.za).
It is these very consumers who often lack the understanding of the implications of borrowing from loan sharks, and thus get themselves into deeper debt and put themselves and their family’s safety at risk.
While traditionally online loan sharks have a slightly better reputation, they are also known for running scams and being unscrupulous in the provision and collection of credit and debt. Often in these situations, the small print is such that the interest rates and conditions attached to these loans result in it being almost impossible for the loans to be paid back within the stipulated time, thus attracting compound interest and creating the need to seek further credit elsewhere to service the existing debt.
Being in debt is a difficult situation to get out of, and it can be very difficult to resist obtaining instant cash from loan sharks. However, unless absolutely unavoidable, this should be treated as a last ditch option, as the implications this attracts can often be much more dire than being a little short on cash.