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What is Loan Shark? |
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What Are The Catches? Loan sharks which are normally unlicensed money lenders will offer loan to those who need cash. However, there is always a major catch - how much has to be paid back. The terms on offer will usually be very poor. There are many cases of people borrowing a small sum of money and paying double or triple that original sum in interest. Many loan sharks count their loan’s interest rates based on the principle amount and the interest rate may goes as high as 12% per month (144% APR). For example, if you borrow $5000 from a loan shark, you need to pay $600 every month just for the interest. You will never payoff your loan amount if you just pay $600 a month because the interest rate is counted based on principal amount, the $600 you pay is the interest. The power of interest is work well in your savings, it will generate more cash in your saving account. But if the poser of interest is used on a loan, especially on the loan from a loan shark, it will be very scary as it will generate more and more debts and it make you harder and harder to repay your debts. Take for the above example, if your borrow $5000 from a loan shark and you can only pay $500 each month. Your debts will climb up about $18,000 in 2 years and you have paid $12,000 of interest. Your debts will continue to increase in very scary trend if you continue to pay only $500 to the loan shark; your debts will hit $50,000 in another year (the third year) for your $5000 loan and with $18,000 interest paid. |
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