Julianna (name changed), a middle-aged Filipino woman, borrowed AED 10,000 from a man and was convinced into surrendering her passport as a guarantee. After paying back a total of AED 17,000, Julianna was told that she still owed the principal amount of AED 10,000. The lender had charged her an interest rate of 10% or an exorbitant AED 1,000 per month! Fortunately, a friendly couple saved a distraught Julianna from taking out another loan by arranging timely legal help.
Julianna’s case is just one in a long list of examples of people falling prey to a nasty loan shark attack, and while she found her way out of the mess, not everyone is as fortunate as her.
Who are loan sharks and whom do they target?
Loan sharks prey on cash-strapped borrowers who are unable to obtain a bank loan due to bad credit history, an existing debt pile or lack of original documents. These illegal lenders will initially appear to be friendly to gain your confidence and cajole you into taking an easy loan from them. However, the offer will come with a higher than usual interest rate and hidden fees, turning your small loan into a huge financial burden. What’s worse is that they will try every trick in the book to get back their money, which includes violent threats, scare tactics, and even kidnapping.
How to spot and avoid a loan shark?
It’s very hard to ignore the lure of easy money when you are reeling under, say a credit card debt, or the need to build a house. However, it’s important to understand the kind of mess you could get into if you accept their offer. The first rule is to identify any lender who is eager to loan you easy money, without much paperwork or borrowing restrictions, and respectfully decline the offer. The person will try to exploit your vulnerability by using persuasive methods, but you must never budge. Once you have avoided the lure of unsolicited money, you can look for other financial solutions.
If you have an existing debt and banks are refusing you to loan you any more money, you can take the legal route to negotiate the terms with the lenders. Get in touch with the Pro Bono Clinic run by the DIFC Academy of Law if you cannot afford legal help. Alternatively, you can also approach Dubai courts and the Abu Dhabi Judicial Department, who also offer free legal advice.
I borrowed money from an illegal lender, what should I do?
It’s not easy to escape the clutches of a loan shark and the only way out is to clear the debt and never repeat the mistake of borrowing such money again. You can work part-time jobs to make additional income, borrow money from friends & family, sell some assets, and bring down your monthly expenses.
For borrowers who have surrendered their passports and are going through what Julianna did, the best recourse is to seek legal help. As already mentioned, you can approach several firms for free legal services. In case you are receiving violent threats and abusive calls from the lenders, do not hesitate to approach the police.
In the end, the golden rule is to avoid loan sharks at all costs as short-term solutions like these can turn into a huge financial mess in no time.