What is Loan Shark...?

A loan shark is a person or body that offers unsecured loans at high interest rates to individuals, often backed by blackmail or threats of violence.

Throughout history, usury laws made loan sharks commonplace. Many moneylenders skirted between legal and extra-legal activity. In the western world in recent years, loan sharks have been a feature of the criminal underworld, but otherwise rare. Loan sharks are common in the UK, Italian Cosa Nostra and Triads in China.

There are many registered and legal lenders that lend to people who cannot get loans from the most mainstream lenders such as large banks. They often operate in cash, whereas mainstream lenders increasingly operate only electronically, which means that they will not deal with people who do not have a bank account. Terms such as subprime lending and "non-standard consumer credit" are used for this type of lender. Payday loans are one example of this type of consumer finance. The availability of these products has made true loan sharks rarer, though some legal lenders have been accused of behaving in an exploitative manner.

Payday loan operations have also come under fire for charging inflated "service charges" for the service of cashing a "payday advance" — effectively a short-term (no more than one or two weeks) loan for which charges may run 3-5% of the principal amount. By claiming to be charging for the 'service' of cashing a paycheck, instead of merely charging interest for a short-term loan, laws which strictly regulate moneylending costs can be effectively bypassed.