Beware the loan sharks lurking in the shadows at noon!

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In today’s hard times, the allure of quick cash can be tempting, but it’s crucial to steer clear of loan sharks. These predatory lenders are not here to help; they are here to exploit and devastate. When you need financial assistance, seek reputable sources like licensed banks or microfinance companies. Loan sharks and most informal money lenders are dangerous and can ruin your life.

Just yesterday, a friend of mine found himself in a dire situation. He had borrowed UGX 9,000,000 from a loan shark to purchase a car for his business. Unfortunately, he fell behind on his payments, and after two months of delinquency, the lender impounded his vehicle. To get his car back, the lender demanded a deposit of at least UGX 4 million.

Loan burden can significantly impact one’s financial stability. It often leads to stress and limited economic freedom.Seek consultation before taking action!

These days, I am cautious about getting involved in others’ financial woes. I invited my friend for a detailed discussion to understand his predicament better.

He revealed that on January 10, 2022, he had taken out a four-year loan at an astronomical interest rate of 10% per month. Two years into the loan, he still owed UGX 8.2 million of the principal, having repaid only UGX 800,000. Desperate, he sought my help to raise UGX 4 million to reclaim his car, declaring that I was his only hope.

It frustrates me when people expect me to solve problems they have created for themselves. I told him, “Don’t look to me for solutions to issues you’ve caused. You should have considered the consequences earlier.” During our conversation, I remembered him mentioning the 10% monthly interest rate. I asked him, “Where is your loan repayment schedule?”


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To my surprise, he didn’t have one. I instructed him to contact the lender and request it immediately. He called, only to be told that the lender couldn’t provide the schedule. I advised him to insist on collecting it in person, but they refused. Consequently, I downloaded a loan repayment schedule template online and calculated his repayments to help him understand the gravity of his situation.

When I showed him the calculations on my laptop, he was visibly shocked. After he regained his composure, I explained why he still owed UGX 8.2 million despite making regular payments for two years.

The monthly repayment schedule revealed the harsh reality: the total interest on his UGX 9 million loan amounted to UGX 34 million. Out of his UGX 909,373 monthly payment, only UGX 9,373 went towards the principal. Over two years, he had paid UGX 20,995,446 in interest and only UGX 829,514 on the principal.

I advised my friend to find a way out of this exploitative contract. Since his car, bought with the loan shark’s money, had been impounded, he should consider letting them keep it. I also recommended that he gather all related documents, including the loan agreement, official repayment schedule, and proof of payments, so we could seek legal redress for unfair business practices. The terms of his loan were not just unfavorable; they were predatory and illegal.

How can such practices be allowed to flourish unchecked? A 10% monthly interest rate, translating to 120% annually, is outrageous and should be illegal. I did a quick comparative computation using a 24% interest rate from an expensive bank, and the total interest rate would be just Ugx. 5m, making the total cost of the loan to be just Ugx. 14m.

Entrepreneurs and businesspeople must always consult with lawyers and accountants before committing to any financial agreements. While their services may seem costly, they can save you years of stress and financial loss in the long run. Trust the experts, and they will help you achieve your dreams.

Mr. Strategy, Summit Consulting Ltd.


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