Malaysians call them “Along”, or loan sharks. They are illegal money lenders who target the poor and the desperate.
They are known for their ability to seduce and lull people into feeling secure. The money you borrow will be very expensive and also a high risk. It may seem like it will not be so difficult if you only borrow a small amount of money and plan to repay the loan in the shortest time possible. But this is not the case with illegal money lenders. Here are the reasons:
1. Inexpensive interest charges that never end
Are you familiar with the term “sepuluh tiga” or ten-three? The term refers to the amount of interest that is charged to borrowers by those who are part of the money-lending community. Sepuluh Tiga interest rate is RM3 per RM10 borrowed from money lenders. This equates to a 30% interest rate per MONTH. This is a staggering 360% annual interest rate!
Let’s take an example of a loan of RM1,000 to the Along. In order to get a better idea of the amount you will have to repay, you will have to pay RM300 per monthly for interest. This means that at the end the year, you will be paying RM3,600 for interest and RM4,600 to pay back the RM1,000 you borrowed. You still think it’s worth trying?
Sepuluh tiga is not the only interest rate that is available. It is ridiculously high. Also, there are sepuluh–empat (ten–four) and sepuluh–lima (ten–five) interest rates that can be applied to certain amounts of loans or borrowers’ credit situations. We don’t like to think that the sepuluh tiga interest rate is too high.
They are also clever in their marketing and have introduced daily interest on small loans. These small loans are usually taken out by the most vulnerable and poorest people, such as farmers, small-scale hawkers and laborers. Locals call this a ‘hari-hari loan’, which literally means ‘everyday’.
Borrowers often find it easy to apply for loans and don’t even have to visit loan sharks to pay their monthly payments. The loan sharks have ‘collectors’ that make daily rounds to collect daily repayments. It doesn’t matter if you have enough money.
Unfortunately, these low-income borrowers are often trapped in the Never-Ending Interest Game played by the Alongs that drags them deeper into debt.
2. Hidden charges and terms and conditions that are as-you-go
Loan sharks are not like banks or other financial institutions. They can offer you terms and conditions that may be more detailed than the banks. It’s not always clear what additional fees or charges might be incurred if you fail to make a payment. They might inform you verbally that there are no fees or charges before you sign the agreement. You can also talk to them about any problems with repayment. If you aren’t happy with the arrangement, they will happily let you know.
It is impossible to believe that this could be further from the truth. Similar to banks, Alongs can charge surcharges and penalty interest rates if you miss or pay late. However, the amount is usually higher than what a bank would charge. The terms of loan sharks are flexible enough that they can alter them at will.
3. Security deposit for important personal belongings
The loan sharks will keep your passport, bank cards, and even your NRIC as a security deposit to make sure you continue to pay your loan. This is even though it may be illegal. The loan sharks will use this illegal safety measure to ensure that you don’t run away to another part of the country or the world to settle your debt.
Personal identification documents, which are legally yours, can only be taken into custody by law enforcement officers for legal purposes. To avoid identity theft or illegal identity duplication, your personal information must be kept safe. It is not worth transferring your NRIC or passport for a loan. They can easily misuse your personal information without you being aware.
4. There is no other option than a full settlement
Lender sharks will not allow you to pay off your debts completely, even if they have the cash. This is so they can keep you paying high interest, which is ultimately their profit.
5. Do not feel pressured to take out another loan to cover the cost of the other.
These Alongs will press you to take another loan from another loan shark if you tell them you have difficulty repaying your loan. This is to “save you the hassle of paying more interest and fees in the long-term”.
Be careful. This is how they trick you into falling in debt with higher interest rates.
6. Harassment and violence
They will resort to harassments and threats if you fail to pay your debts to the Along. Worse, they will not hesitate to involve your family in their coercion to forbid you from making payments.
An elderly couple were harassed for months by loan sharks in January 2016 because their daughter was in unpaid debt. They even set fire to their house. The news was shocking and shocked the nation.
The best way to deal effectively with loan sharks is to avoid dealing with them. If you are unable to get a loan from banks, look for licensed and legal money lenders. Compare the top personal loans available to consolidate debts if things are not so bad.
Contact financial advisory bodies like AKPK to get financial advice without putting your neck at risk.
What are your views on loan sharks and other loan sharks? Comment below to share your thoughts and suggestions about loan sharks or why you shouldn’t take a loan from them.