Need to know more about loan sharks in New Zealand ? Who are they ? How they operate ? How they make money ? then you have come to the right place. In this section we will explain everything you need to know about loan sharks
Define Loan Sharks
All of the following terms are synonymous: Fringe lenders, third tier lenders, payday lenders, loan sharks. All of these terms have the same definition.
People or institutions who lend money at very high interest rates, often illegally. For the purpose of this article, the term loan sharks will be used.
Loan Shark Target
Loan sharks target low income New Zealanders who are often deeply in debt, earn low wages with few prospects for pay increases, and who pay exorbitant prices for their housing. People who suffer in these conditions often have few legitimate lending options and see loan sharks as their only option when they struggle to make ends meet
Who Are Loan Sharks ?
The Families Commission of New Zealand reports that alcohol businesses, loan sharks, mobile truck shops, door-to-door sellers, and pokies (slot machines) proliferate in these communities. Loan sharks are the worst of these predatory businesses and they habitually disregard the laws in place to protect consumers. They target families who can least afford their interest rates and loan terms.
The average short-term loan from a loan shark is estimated to be approximately $300. The repayment terms are usually less than a month, and the exorbitant interest rates and finance charges average $100 in less than a month’s time. On average, the same $300 is lent every month to the same borrower in the space of a year
How Do They Make money
Loan sharks make about $1,000, or a return or 333 percent per $300 loan. Loan sharks make one-third of their income from administration fees and two-thirds from extremely high interest rates. Eighty-five percent of the money lent to consumers from loan sharks is done via the internet. Very often, a lender operates under many different names, and has a separate website for each name.
Who Needs Loan Sharks
Loan Sharks have two kinds of customers, blue collar individuals and families who need to meet unexpected charges such as electric bills, medical needs, and big phone bills, and white collar consumers with high incomes who spend more money than they earn, have no savings, and who carry large amounts of debt. They are all desperate borrowers who are taken advantage of by loan sharks.
Though what loan sharks do outwardly appears to be illegal, in actuality, their activities are often above the line of illegal activities just enough that they cannot be prosecuted. The New Zealand consumer protection laws passed in 2014 now require them to be transparent and upfront about the terms of their loans.