Kiran was worrying about affording New Honda Activa she wished to present for her two young girls, Aarti 16 and Aashi 15. She was 30,000 short when she spotted an advert in her local paper for unsecured loans and believing it was a legitimate company who could help tide her over, she decided to call the number.
A man answered, and told her he would be able to lend her 30K, but it would need to be secured on something. He came to her home and took her passport, explaining that this would be returned once she had repaid in full. He explained that she would need to repay with 10% interest on outstanding and a part of Principal amount per month. She never knew that 7.5% compound interest would be applied on unpaid interest if it is not paid monthly.
She knew this was steep but she was desperate and believed she would be able to pay back within a few months with her wages from working in a shop. Three months later, Kiran fell ill and was unable to work. As a result of this she defaulted on a couple of payments. She was resting at home with her young daughters when the loan shark barged in with two other men, demanding to know why she hadn’t paid. They pulled electrical items out of her living room, claiming the loan was secured against these.
Kiran was terrified, “There was nowhere to go. I wasn’t even safe in my own house. I was screaming, crying, pleading with him not take my stuff. To think that my girls had to see that…” A few days later she received a note from the loan shark through her door, to tell her that an extra Rs. 5000 had been added to the debt for the ‘bailiff’ visit. From that point onwards, she paid the loan shark religiously, retaining the post office slips as proof of payment. However the loan shark still appeared at her door alleging that she’d missed payments. He would turn up late at night and on one occasion Kiran had to hide as he tried to climb in through her kitchen window. For every visit he would add an extra charge of Rs. 3000 to Rs. 6000. This continued for 5 years, with Kiran paying back around Rs. 2,52,000 on the loan of Rs. 30,000. No, you are not reading a fiction, it is a big bad reality that Money Lenders operate, and lend money to needy at 10 to 20% interest, which becomes endless cycle of torment for borrower.
What is a loan shark?
Loan sharks are illegal money lenders operating without authorisation from the ASSOCHAM. By lending without a licence they’re committing a serious criminal offence, and should be avoided at all costs. Loan sharks often charge an extremely high rate of interest, and use intimidation or threats of violence to pressure their ‘customers’ into paying up. They usually target struggling families; the unemployed, single mothers, or people with limited ways of obtaining money when they need it.
Why are loan sharks a bad idea?
Aside from being dangerous, loan sharks can be very cunning, knowing exactly what to say in order to win a person’s trust. They can seem friendly and charming at first, often introducing themselvesas ‘a friend of a friend’ who heard you were struggling. They can be hazy with the details, glossing over things such as the interest they’ll expect or the lack of paperwork they’re carrying. It can be tempting to fall for a loan shark’s Good Samaritan act, but don’t. That charm will disappear overnight.
Today, all the banks are offering Personal Loans, Vehicle Loans at very nominal rate of interest i.e. 8.5% P.A. So, you must choose a bank for your purpose rather than giving a token to lender in terms of rob you regularily.
(Author is an Export Entrepreneur)