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Why You Shouldn’t Opt for Loan Sharks in Malaysia

Ever wondered why you shouldn’t opt for loan sharks in Malaysia?

Loan sharks, commonly known as ‘Along’, might appear as a tempting solution at first glance, as they offer a seemingly quick solution to your monetary troubles.

However, when it comes to your financial well-being, the allure of convenience can be deceptive.

Join us as we explore the critical reasons why choosing loan sharks is a financial choice you should avoid at all costs.

What is the Difference Between Loan Providers & Loan Sharks in Malaysia

There are several distinct differences between legitimate loan providers and loan sharks in Malaysia. For your convenience, we’ve created a table to serve as a comprehensive guide:

Loan Providers SubjectLoan Sharks
They operate under a legal framework and are registered and regulated by the Malaysian government.Operation FrameworkThey operate outside the legal framework, making their operations illegal.
They need to have a valid license under the Moneylenders Act 1951 to provide loans.Licensing They aren’t licensed or regulated by any authority in Malaysia.
The interest rates they charge are regulated and capped by the government.Interest RatesThey often charge exorbitant and variable interest rates well beyond what’s permissible under Malaysian law.
They usually have a physical office or legitimate contact information where they can be reached, and they maintain transparent business practices.TransparencyTheir operations tend to be more secretive and less transparent.

Read More: Personal Loan Scam in Malaysia: How to Stay Safe

Why You Shouldn’t Opt for Loan Sharks in Malaysia

These elusive and often dangerous lenders may pride themselves on a quick solution to your financial troubles.

In truth, however, the risks they bring far outweigh any potential benefits. Below are the main reasons why you shouldn’t opt for loan sharks in Malaysia.

1. Hidden Costs & Unclear Terms

One of the primary reasons to avoid loan sharks is their lack of transparency when it comes to loan terms.

They often provide vague or incomplete information before you sign an agreement.

For instance, they may not inform you of any additional charges that may be incurred if you miss a payment.

This lack of transparency can lead to unexpected financial burdens.

Not only that, the absence of written terms also allows loan sharks to change rules and rates at their discretion, leaving borrowers in a vulnerable position without legal protection.

2. Exorbitant Interest Rates

Loan sharks are also notorious for imposing excessively high interest rates, which are often exponentially higher than those offered by regulated financial institutions or licensed moneylenders.

This is because they operate outside the bounds of government-mandated interest rate caps, allowing them to charge exorbitant rates with impunity.

These sky-high interest rates can quickly spiral out of control, making it extremely difficult for borrowers to repay their debts.

As a result, borrowers often find themselves stuck in a never-ending loop of borrowing just to service the interest on their existing loans.

3. Predatory Practices

Furthermore, loan sharks frequently employ deceptive tactics to ensnare borrowers in a perpetual cycle of debt.

These unscrupulous lenders resort to coercion, manipulation, and even threats to compel individuals to borrow repeatedly, creating a web of financial entrapment.

Additionally, loan sharks usually do not allow borrowers to pay off their debts in full, even if borrowers have the means to do so.

This insidious strategy ensures that borrowers continue paying high interest rates, which constitutes the loan sharks’ primary source of profit.

4. No Legal Protections

Since the operations of loan sharks are illegal in Malaysia, borrowers have no legal protections when dealing with them.

Without legal safeguards, borrowers face a heightened risk of exploitation and abuse. In fact, any agreement, if provided at all, is essentially void in the eyes of the law.

This means that borrowers are left without any form of legal recourse in the event of disputes, unfair treatment, or violations of the terms of the agreement.

5. Aggressive Collection Methods

Loan sharks are infamous for employing extreme and often violent methods to ensure repayment.

Borrowers may face threats, intimidation, and even physical harm if they cannot meet repayment demands.

Such aggressive collection tactics can pose significant risks to borrowers’ physical safety and well-being.

6. Psychological Stress

Borrowing from loan sharks can lead to immense psychological stress due to the constant threat of aggressive debt collection.

The psychological stress caused by dealing with loan sharks extends beyond the individual borrower. It can disrupt family life and strain relationships.

The fear and anxiety associated with aggressive debt collection can create a hostile environment at home, affecting not only the borrower but also their loved ones.

7. Asset Confiscation

Loan sharks might resort to seizing personal assets, such as passports, bank cards, and NRIC to coerce borrowers into continuing loan repayments and prevent them from leaving the country.

It is imperative to understand that the confiscation of personal assets by loan sharks is not only unethical but also illegal.

Only law enforcement agencies possess the legal authority to take custody of personal identification documents.

Moreover, sharing such personal documents with loan sharks can expose borrowers to identity theft and misuse of their personal information without their knowledge.

Read More: Applying for Personal Loan Without Payslip: What to Know

How to Protect Yourself from Loan Sharks in Malaysia

Dealing with loan sharks can be a perilous endeavour, but there are steps you can take to protect yourself from falling victim to their exploitative practices.

Here are essential measures that you should take to fortify your defences against loan sharks and make informed financial decisions.:

1. Research

Before considering any borrowing arrangement, conduct extensive research to verify that the entity you are dealing with is licensed and operates within the bounds of the law.

Most importantly, ensure that they hold a valid license under the Moneylenders Act 1951, demonstrating their legitimacy.

You can conveniently do this by using the ‘I-kredikom’ app, available on both Google Play and the App Store, to check licensed moneylenders.

2. Avoid Too-Good-To-Be-True-Offers

Exercise caution when confronted with offers that appear to be exceptionally favourable, such as extraordinarily low-interest rates or instant approvals without background checks.

Loan sharks often employ such offers as bait to lure unsuspecting borrowers into their schemes.

3. Vague or No Documentation

Insist on clear, written agreements and receipts for all financial transactions. If a loan provider hesitates or outright refuses to provide such documentation, it should raise immediate red flags.

Remember, having a written agreement and receipts is not just a formality; it’s your shield against potential exploitation.

4. Know the Regulations

Take the time to familiarise yourself with the Moneylenders Act 1951 and other relevant laws governing lending practices in Malaysia.

Understanding your rights and the legal framework can empower you to make informed decisions and help you identify any potential violations.

5. Understand Interest Rates

By understanding the average interest rates prevailing in the market, you gain a benchmark against which you can evaluate any loan offer.

This understanding serves as your radar, enabling you to recognise when a rate is suspiciously high or low, so you can steer clear of exploitative lending practices.

For example, if you are borrowing RM10,000 with a yearly interest rate of 24% and a loan tenure of 5 years, you can calculate the total interest as follows:  

  • Total interest: RM10,000 x 24% x 5 years = RM12,000
  • Total repayment over 5 years: RM10,000 + RM12,000 = RM22,000
  • Yearly repayment: RM22,000 / 5 years = RM4,400
  • Monthly installment: RM4,400 / 12 months = RM367 per month.

However, be aware that standard profiles in Malaysia typically range from 3% to 12%.

Any offer significantly above this range, particularly if the monthly repayments are considerably higher than expected (in this case 24%), should be approached with caution.

You could be stepping into loan shark territory.

Read More: Tackling Personal Loans for High-Commitment Individuals

How Bluebricks Can Help You

Opting for loan sharks can lead to financial ruin as they operate outside the boundaries of legality. Bluebricks offers you a safe and legitimate alternative to these risky options.

At Bluebricks, we strive to provide a responsible and ethical lending solution. With our guidance, you can make informed choices that protect your financial well-being and ensure a secure future.

Whether you are looking for a personal loan to consolidate existing debt or cover unexpected expenses, Bluebricks is here to help. Our range of solutions include:

Loan Consultancy Service

We endeavour to equip individuals, especially those vulnerable to the allure of loan sharks, with the tools, knowledge, and resources necessary to safeguard their financial well-being.

Our experts will recommend an appropriate loan product tailored to your specific circumstances, which include:

  • The specific loan amount you require.
  • The urgency with which the loan amount is needed.
  • Whether you or your parents own a property that has been held for over ten years.
  • Your income level.
  • Your CTOS score (such as your credit score and credit history).

Why You Shouldn’t Opt for Loan Sharks – FAQs

To offer a clearer understanding, we’ve created a set of frequently asked questions (FAQs) to address common concerns and queries about why one shouldn’t opt for loan sharks:

What exactly is a loan shark?

A loan shark is an unregulated, illegal lender who typically operates outside the boundaries of the law.

They offer loans under exploitative terms, often imposing exorbitant interest rates and using coercive methods to secure repayment. Borrowing from loan sharks can lead to a cycle of debt and financial distress.

How do loan sharks operate in Malaysia?

Loan sharks typically operate outside the legal framework in Malaysia, offering loans without the required licenses and registrations.

They often target vulnerable individuals, charging extremely high-interest rates and using unethical practices to enforce repayments.

What makes legitimate loan providers different from loan sharks?

Legitimate loan providers operate within the legal framework, holding the necessary licenses and adhering to government regulations.

They provide loans under transparent terms, capped interest rates, and established legal protections for borrowers.

Why shouldn’t I opt for loan sharks in Malaysia?

Opting for loan sharks in Malaysia can have severe consequences. They often employ predatory practices, charging excessively high-interest rates, using aggressive collection methods, and operating outside the law.

Due to the matters above, borrowers face financial distress, legal risks, and personal harm when dealing with loan sharks.

Are there legal protections for borrowers when dealing with loan sharks?

No, borrowers have minimal legal protections when dealing with loan sharks. Since loan sharks operate outside the legal framework, any agreements made with them have no legal standing. This leaves borrowers vulnerable to exploitation and abuse.

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Picture of Wilson Wai Kit

Wilson Wai Kit

Senior Consultant

With extensive banking experience, notably as a mortgage sales officer at UOB Bank, Wilson leverages his understanding of loan applications and approvals to offer financial insights and support to empower individuals to make informed decisions regarding their financial futures.

Feel free to contact him for assistance with your financial needs!

I want to know about bank loans
Picture of Wilson Wai Kit

Wilson Wai Kit

Senior Consultant

With extensive banking experience, notably as a mortgage sales officer at UOB Bank, Wilson leverages his understanding of loan applications and approvals to offer financial insights and support to empower individuals to make informed decisions regarding their financial futures.

Feel free to contact him for assistance with your financial needs!

I want to know about bank loans



About Bluebricks

BlueBricks Holding is one of the top ten leading loan agency companies in Malaysia in terms of loan approval rates. As a leading loan agency company, we have extensive knowledge and experience in mortgage, personal loans, and business loans, and this enables us to help our customers to get the deal that is best suitable to them.

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