Bad times: Loan sharks cutting collateral value
A mean-looking man with a serious expression on his face usually came to me when I thought of a shylock, also known as a loan shark. Shylocks are those who lend money to folks who are in desperate need but are unable to obtain bank loans due to past loan defaults or the fact that they are simply too risky.
However, shylocks are by nature predatory lenders that impose excessive fees, make violent demands for payment, or seize the property of defaulters as soon as they are unable to pay. That’s why I was shocked to discover a shylock who had the sweetest face imaginable.
From her electronic pawn store in Githurai 45, Jane (not her real name), lends money to customers at a weekly interest rate. According to Jane, the loan amounts and interest rates vary depending on the value of the offered collateral item, but often start at about Kes400 per week.
She claimed that the value of items being pawned had really decreased by over 40 percent over the course of the year and might do so again if the difficult economic situation continues. For instance, the smart TV that is currently on sale for Kes5000 cost around Kes8000 at the beginning of the year.
Despite the sharp decline in prices of collateral products, more people are pawning electronics to obtain cash in order to cover expenses and handle emergencies. Televisions are the items that are pawned the most. She claimed that as a result of the nation’s strong economic standards, more customers were coming into their store.
“Watu wengi wanakuja huku to borrow quick money. Maisha yamekuwa magumu and banks are not willing to loan money to someone who does not meet the stipulated qualifications,” Jane explained.
Read also: Cost of defaults on bankers double
Shylock loans are pricey, but they have advantages such being simple to get and being essential for facilities that need to be available quickly. They help people manage their finances, especially in emergency situations where it’s simple to borrow money, even for necessities like paying rent or buying food.
In other circumstances, all you need is a guarantor and collateral valued at the amount you require. Additionally, as soon as your loan is repaid, you can always receive your equipment back. In the worst circumstances, they make life bearable. The advantages, nevertheless, are transient and do not outweigh the drawbacks.
Shylock loans contain extremely high interest rates, making it incredibly costly to repay the loan. One also runs the risk of getting caught in a debt cycle because they may end up taking out another loan to pay off the loan shark. If the interest is allowed to build up, it may become hard to repay the loan.
Additionally, some loan sharks threaten and even use violence against some borrowers who don’t repay their loans in accordance with the terms of the arrangement, especially if the sum is sizable.
