A loan shark is a person who lends money to somebody (usually a very poor, very desperate person) with the promise of receiving the original sum and X amount of interest in return. X can be anything from 1% to 1000% depending on the shark.

Violence and intimidation would be the main weapons of a loan shark in order for the money to be returned, and when that fails, the violence usually spreads to the person's closest family and friends.

It's a very nasty business and has been going on for years in the poorest parts of the world.

A loan shark is a person who offers loans to those in desperate need of money in a hurry but have no legal way to obtain it. The interest loan sharks charge tends to be absolutely exorbitant due to the extreme unlikelihood that the borrower will be able to pay back the loan. The shark also wants it back as soon as possible, since they probably don't have a very large reserve to dip into. According to a recent Law & Order episode*, the going rate in Manhattan is 10% a week, and one is expected to pay off the interest immediately. This works out to over 1000% APR if compounded and thus most borrowers end up in perpetual debt to the shark.

Since the rates are well above those set by usury laws in most jurisdictions, sharks have to use their own means of coercion for repayment. Often the shark is a member of a larger criminal organization that helps facilitate collection in return for the majority of the vig. Those that operate independently of organized crime in their area may find need to pay "protection" in order to stay in business.

Interestingly enough, while the authorities continue to crack down on loan sharks, numerous legitimate businesses have started in the last decade that offer loans at similar rates. Generally they advertise themself as "payday advance" loans, where one writes a check for around 10% more than the amount one receives, and postdates it beyond the next payday. Large campaign contributions, slick TV advertisements, and a stated mission of helping out people that are in dire emergencies have allowed these places to stay in business despite charging as much, if not more, than illegal loan sharks.


*Sure, this isn't the best source, but the producers do strive to be accurate. And it sounds about right anyway.

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