You could come across loan sharks in Ghana, you should try as much as possible to avoid them when sourcing for a loan. Wrong decisions with a lender or financial institution can be detrimental when applying for a loan. Making thorough research on lenders or financial institutions is very important, as this helps you to avoid getting into the wrong hand amidst financial problems. If you are struggling with financial issues today, a loan shark is not a good idea for your financial challenges. Read on to see what you need to know about loan sharks in Ghana.
What are loan sharks?
Loan sharks are illegal lenders who usually target desperate families and loan income individuals. Usually, they are always friendly at first, but borrowing from them can be detrimental. Also, a loan shark is an illegal money-lender whose business is to profit from lending money to people. They do not have a licence and have no regulation from any authorities. A loan shark might be a friend of yours or acquaintance. They might even be someone around your area lending money to people. They always deal in cash and rarely provide any paperwork, but always demand very high interest rates.
Read also: Who is a lender? Everything you should know
Why should you not consider loan sharks?
Loan sharks charge a very high interest rate on loans, they can charge as high as 100% interest on the principal amount. They always give loans at a very high price, which is very risky regarding loan repayment. One bad thing about loan sharks is that they can harass and threaten you on repayment. Mounting pressure on you to borrow more loans to pay for outstanding loans. This may lead you into spiral debt you can never repay.
How to identify a loan shark
When a lender/financial institution offers little or no paperwork, like a credit agreement or repayment record or option. Then know that the loan is from a loan shark, as it means you need to sign a credit agreement before getting your loan. Also, when they refuse to give information on the interest rate or how much you need to repay. However, also note that when a lender collects documents like passport, driving licence and bank cards as security. Loan sharks increase charges because there is no credit agreement during application of loan. Watch it when a lender refuses to allow you to settle your debt when due. They also threatened and intimidated their customers.
How to know whether a lender is legitimate
In Ghana, the Financial Conduct Authority (FCA) keeps records of all allowed lenders. Therefore, if a lender is not on the list as having a current authorisation to lend money. This is a sign for you not to borrow money from such a lender. Always check a lender on FCA before applying for a loan with any lender in Ghana. Although many loan sharks always engage in intimidation and even violence with their customers. However, they are not beyond the law in Ghana, so note that any lender harassing you is against the law.
Note: Some loan sharks will threaten you with prosecution and even send you to prison if you don’t pay up. But know that an unauthorised lender like a loan shark has no legal right to recover a debt with prosecution. This is because the loan shark is illegal.
How to report a loan shark in Ghana
You might wonder how you could report a loan shark when you see one. Whenever someone you think is a loan shark approaches you, report them to the police right away.
What are the alternatives to loan sharks in Ghana?
Faced with financial challenges, you may probably have a poor credit. Maybe you just need a small amount of money for a short while. Rather than go to a loan shark, check out some instant loans in Ghana. Also, there are reputable lenders in Ghana you can turn to. Some lenders include:
1. Credit unions
You should borrow from a credit union, though they may tell you to become a member. Also, they may request you to save a specific amount of money before you can borrow.
2. Help from the government
If you are seriously in need of cash in Ghana, ensure you are getting all the entitlement due to you. However, not just anyhow entitlement, but the right entitlement.
3. Budgeting Loan from the Social Fund
Whenever you desperately need to borrow, you can apply for an interest-free budgeting loan from the Social Fund.
Note: Loan sharking is illegal, but when you borrow from a loan shark, you have not broken the law, but they have.
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Loan sharks in Ghana currently are making a killing in this current economic climate. However, according to sources within the banking industry, most banks have rather cut down interest on lending.
This means that the government must do much more to help the local economy. The government has to consider setting up a financial strategy that would help people from the low income group to have access to cheap credit. Although some of these funds are already in existence. But sadly, they lack proper management and disbursement. Meanwhile, those who have tried through funds set up previously complain of bureaucracy and excessive paperwork.
However, if you cannot make repayments, loan sharks often threaten violence or request valuable items as an alternative to a repayment. Sometimes, they force you to do favours for them, which may lead you into criminal activity. Instead of borrowing with loan sharks, you can always source loans from a legit financial institution.