We all know from police ads and Singaporean drama serials that loan sharks are bad news, but do you know how loan sharks work in Singapore? I definitely didn’t know until I had an extensive conversation about loan sharks yesterday with somebody who is not a loan shark. I’m going to share with you a little bit about what I learned about the business of loan sharks, so that in times of desperation, you will be able to make an informed decision about whether to approach a loan shark for financial assistance or not.
Most of us would know that you do not need any collateral to take out a loan from a loan shark, and because of that, loan shark interest rates are very high. But exactly how high? I’m not sure how competitive loan sharks are with their interest rates, but 25% is a fairly accurate ball park figure, and I think most of us can agree that 25% is a little insane. But you know, that’s around the effective annual interest rates of credit cards right? So you urgently need a sum of money, you think 25% is manageable, no fuss, no collateral, let’s do it, let’s get some cash!
Before you get your cash, you will need to provide three pieces of information to the loan shark: your identity card number, your identity card’s date of issue, and your bank account number. Easy peasy!
So you borrow $1000 from a loan shark. The loan shark gives you $750, because $250 is kept by the loan shark as your interest payment up front.
You are given 10 weeks to repay your $1000 loan. If you default during any week, the amount you owe to the loan shark goes back to $1000.
Fine, let’s not default then! You pay off your loan in 10 weeks. Phew.
Your friendly neighbourhood loan shark calls you up cos you’re a really good customer. The loan shark says, “Hey, I’ve transferred $750 into your bank account, you owe me $1000.” But I didn’t borrow any money, you say. Yes you did, the loan shark says. Anyone can transfer money into your bank account, and that includes your mother and loan sharks.
You think you can just ignore the loan shark, since you didn’t ask for the money. But you can’t. Because the loan shark has your IC number and its date of issue, he can find out everything about you. Everything the government has on you, the loan shark has it too, and with all that information, the loan shark will be able to find you, your husband/wife, children, neighbour, car, boss, dog, plant…
But that’s just what I heard yesterday, from my friend who is not a loan shark. If you have had pleasant experiences borrowing money from a loan shark, please let me know.
If you’re an actual loan shark reading this, and you do not think this is an accurate representation of your business, please let me know too. I do not want my blog post to be ruinous to your business.