Samurkas Group
In the days before payday loans were common people with poor credit who needed cash had few options so many resorted to borrowing from loan sharks. There are a lot of people who would say that things really haven't changed. There is certainly a feeling that payday lenders are no better than loan sharks and you can certainly see why they feel this way. There are however some key differences between the two and it is important to keep that in mind if you do need to borrow money.
In large part few payday loans are issued by loan sharks, although you can be forgiven for thinking that they might be. A loan shark is a criminal who loans money at an interest rate that is above that which is legally allowed. Most payday loan companies have figured out loopholes that allow them to charge interest that is above the legal rate. In most cases this is done by adding fees to the loan in addition to the interest. In either case you are going to be paying a lot for the money that you borrow.
The big difference between payday loan companies and loan sharks is what they will do if you fail to repay the loan. A loan shark will use any means necessary to get their money and since they usually have no legal recourse that often means violence. Since payday loan companies are operating legally they do have legal options and will likely file a lawsuit to get their money. This is really the key difference between the two lenders.
Far from being loan sharks many payday loan companies are large publicly traded corporations, however there are also much smaller companies that offer them as well. While most payday loan companies do operate legally you do have to be careful since some of them will push the limits of the law. It is important that you know what the rules regarding payday loans are in your state so that you can be sure that you don't end up taking a loan that has illegal terms. It is usually the smaller lenders who will try this but you do have to be careful even with the large companies.
One thing that payday loan lenders and loan sharks have in common is that you have little recourse in the event that you take out a loan that does not conform to the law. You can sue the payday loan company if you want to but in most cases the legal fees will be higher than the amount that you can collect. This is why you occasionally see these companies trying to get away with offering loans that are not in compliance with the law. It is also why a lot of states are now starting to ban payday loans, it is really the only way to protect the consumer.