Loan Shark

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DEFINITION of 'Loan Shark'

A person or entity that charges borrowers interest above an established legal rate. Depending on where a person lives, lenders typically cannot charge more than 60% interest per annum. A loan shark, then, would be someone who illegally charged interest over the state's legal limit, which could range up to, or even over, 100%.

BREAKING DOWN 'Loan Shark'

For example, a loan shark would lend $10,000 to a person with the provision that they be repaid $20,000 within 30 days.

A big word of caution is that loan sharks will often back their lendings with threats of violence or damage to a person's reputation as a way to ensure the loans are repaid. If you find yourself in a position of owing to a loan shark, make sure you talk to a financial (and maybe a legal) professional to help you get out of the situation.

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RELATED FAQS
  1. How does a bank determine what my discretionary income is when making a loan decision?

    Discretionary income is the money left over from your gross income each month after taking out taxes and paying for necessities. ... Read Full Answer >>
  2. What is the difference between accrued revenue and accrued interest?

    The difference between accrued revenue and accrued interest is that the former represents accumulated income that has not ... Read Full Answer >>
  3. In what instances does a business use closed end credit?

    The most common types of closed-end credit used by both businesses and individuals are mortgages and auto loans. Businesses ... Read Full Answer >>
  4. When capitalizing interest, will interest accrue while you are in a deferment?

    When capitalizing interest, interest accrues while a person is in a deferment of his loan. In the event of a deferment, the ... Read Full Answer >>
  5. Why is more interest paid over the life of a loan when it is capitalized?

    More interest is paid over the life of a loan when that interest is capitalized because the capitalized interest is added ... Read Full Answer >>
  6. What are the most common instances to use hire purchases in a small business?

    Hire purchases are commonly used to acquire high-dollar business assets, such as technology equipment, transportation fleets ... Read Full Answer >>

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