How Is Loan Sharking like Banking? How Is Loan Sharking Different from Banking?

How is loan sharking like banking? How is loan sharking different from banking?

Loan sharking is similar to banking most definitely because when loan sharks loan money, they charge interest just as a regular bank would do, however one should note that there are differences. On page 35 of The Ascent of Money, Ferguson states that, "Anyone who lends money to a merchant (a loan shark) if only for the duration of an ocean voyage, needs to be compensated. We usually call the compensation interest: the amount paid to the lender over and above the sum lent, or the principal. Overseas trade of the sort that Venice depended on could not have happened if its financiers had not been rewarded in some way for risking their money on mere boards and men".

One can conclude that loan sharks aren't limited to charging interest based on just money; unlike a bank, they may also take whatever else it is they wish as interest. Shakespeare also demonstrates this in the play, The Merchant of Venice. A Jewish loan shark by the name of Shylock agrees to lend a merchant by the name of Antonio some money. However he demands a pound of flesh, in other words Antonio's death if he is unable to repay his debt.

It is clear that loan sharking has principles similar to banking, but in the end there are extreme differences. For the person that needs to borrow money, it is simply not a reliable method to pursue.