Loan Shark vs Bank Rate Comparator

Compare the true cost of informal lender (loan shark) rates vs bank loans. See exactly how much extra you pay — and why formal credit is almost always better.

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Compare Loan Costs

Extra Cost of Informal Lending
Informal Lender (Loan Shark)
Monthly repayment
Total interest
Effective APR
Bank Loan
Monthly repayment
Total interest
Effective APR
Informal Lender APR
Bank Loan APR
Times More Expensive
Informal lenders often charge 20-50% per month — this is 240-600% APR. Even high-rate digital lending apps (Branch, FairMoney) at 30% APR are typically 8-20x cheaper than typical informal lenders. Always explore formal options first.

Frequently Asked Questions

How do African informal lenders charge interest?
Most informal lenders charge a flat percentage per week or month on the original loan (not reducing balance). For example, "20% per month" on N500,000 means you pay N100,000/month in interest — forever until principal is repaid. This results in an effective APR of 240%+, many times higher than any formal lender.
Why do people still use loan sharks in Africa?
Speed and accessibility: informal lenders offer cash within hours with no paperwork, no credit check, and accept any collateral. For someone without a bank account, salary slip, or credit history, formal credit is inaccessible. Improving your credit profile (maintaining a salary account, using digital wallets) is the first step toward accessing cheaper credit.
What are safer alternatives to informal lending?
In order of cost (cheapest first): (1) SACCO/credit union loan (8-15%/yr), (2) Salary advance from employer, (3) Digital lending apps (Branch, Tala, Carbon — 20-50% APR, still high but formal), (4) Microfinance institution (36-60% APR), (5) Bank personal loan (18-30% APR). Any of these is better than informal lenders at 240-600% APR.