Future Business Leaders of America (FBLA) Personal Finance Practice Test

What do you call lenders who are not licensed and charge exorbitant interest rates?

1. Creditors

2. Loan sharks

3. Micro-lenders

4. Peer-to-peer lenders

The correct answer is: Loan sharks

Lenders who are not licensed and charge exorbitant interest rates are commonly referred to as loan sharks. This designation highlights their predatory lending practices, which often involve offering loans with terms that are highly unfavorable to borrowers. Loan sharks typically operate outside of legal regulations, avoiding licensed frameworks that protect consumers. Their interest rates can be significantly higher than what is deemed acceptable, often leading borrowers into a cycle of debt that is difficult to escape. This practice is illegal in many jurisdictions, but loan sharks continue to target vulnerable individuals who may not have access to traditional banking services. Understanding this term is essential in personal finance, as it helps individuals recognize and avoid high-risk lending options that could harm their financial stability.