Personal Loans vs Loan Sharks

Personal loans vs Loan sharks

Life is a *potato. It's hard to find a job and even harder to start and maintain a business with the Philippines having one of the largest tax rates in Asia. Where do people go to find quick cash? The banks, supposedley, for personal loans. But mounting requirements and long processing time are huge drawbacks to Pinoys in need. People have found loan sharks or what is normally called "5-6," which means "if you borrow 500, you give back 600." They offer a whopping 20% interest rate, versus bank rates of 1.4%. And pinoys are willing to take that risk.


Here are four reasons to think about before you get into the water with loan sharks. We'd also suggest that if, in the end, you will choose personal loans from the bank rather than from illegal lenders, please compare with GoBear on We don't bite, and we're definitely free to use.



Loan sharks are illegal and punishable by law

5-6, the bastardisation of bank personal loans, is a form of usury - an illegal business of lending money at unreasonably high interest rates, which largely favours the lender. If you're ever in dire need of money, just remember that loan sharks offer them at 20% interest rates. And if you can't pay back, there's a huge possibility of intimidation, that could lead to something else.

Personal loans allow you to build credit history


Do you plan to open up a business in the future or get other lines of credit for getting a house or a car? Getting a small loan initially or applying for a credit card and paying diligently is your best bet to secure bigger loans in the future. Headed by the Credit Information Corporation, the organization "collects, collates and disseminates credit information" from and for diferent banks in the country. Which means it is easier for banks to check if you have a history of delinquent payments from another bank. If you have a good credit standing, appproving your loan will be as advertised by the bank — 5-7 banking days.

If it's too good to be true, it's probably illegal


Loan sharks only need 1 or 2 IDs to scan or photocopy and you can get your money in 24 hours or less. Some even ask you to give an initial payment before they give you the loan as a collateral. Later on, you can't contact them anymore. And you won't be able to track them, because they're not a registered company. Congrats, you signed a deal with the devil.

Personal loans allow you to consolidate your debt


Some people get personal loans in order to pay debt from other lines of credit. This sounds counter-intuitive at first, but it's a smart move. There are a LOT of programs today which allows you to transfer your debt from different banks into one bank with a lower interest. Most banks have this service called balance transfer, which is also one of the segments you can compare using GoBear. Your debt from the loan shark? Well, that's not applicable in balance transfer. There is also a program called "Inter-debt Relief Program" to help you get rid of debt.

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