Students, beware of loan sharks on campus

Campus loan generally refers to a loan given to a college student on the campus, but it is in essence a private loan. Internet lenders, most of whom are loan sharks, offer such loans to students who need the money to meet their college and other expenses. The demand for such loans is high because it is relatively easy to apply for and receive. But these loans come with high interest rates and often with collateral security, which has included naked photographs of female students.

Not being mature enough to read the dangers attached to such loans, many a student has fallen prey to the loan sharks.

Some internet lenders even promote so-called job-hunting loan, training loan or startup loan using false and fraudulent promotion campaigns, and reducing the threshold for applying for and concealing the true nature of such usurious loans to entrap students. These internet lenders almost always resort to violence if the students fail to pay the high interest rates or the principal amount, or post, or threaten to post, the defaulting female borrowers' naked photos online.

Since campus loans come with many, hidden legal risks, college students should first learn to recognize these dangers, so they can avoid falling in the trap laid by the loan sharks.

First, students should realize that by applying for an "internet loan", they themselves are leaking their personal information. Internet lenders always require the students to provide, among other things, their national ID and student ID card numbers, and bank details. They also require the borrowers to give information about their parents, college teachers and/or classmates as contacts.

Second, while sanctioning campus loan, the internet lenders deduct a certain percent of the money as deposit, service fee or service charge, but still calculate the interest rate on the whole amount. And they use compound interest method, so the next interest is calculated on the principal plus the previously accumulated interest.

And third, some internet lenders use loan tricks to defraud the students, such as inveigling them to sign a contract for a huge loan with high overdue charge, but lending them only a small amount.

In order to avoid the trap laid by illegal campus lenders, the students should limit their consumption to what they really need, increase their financial knowledge and learn how to protect themselves using legal means if they fall in trouble even after taking a loan to pay for their necessary college expenses.

To begin with, before applying for a loan, the students should carefully compare the financial service information available and the extra fees different internet lenders charge on such loans. More important, they should carefully read and understand the loan contract before signing it. They should also analyze and calculate the actual interest, the fine for defaulting on paying the interest and the terms of prepayment, and properly keep the loan certificate.

According to the Supreme People's Court's regulation on dealing with private loan-related cases, the highest loan interest allowed by China's law is 24 percent a year. If the interest is deducted from the principal in advance, then the actual money loaned will be regarded as the principal. And the overall amount of any loan using compound interest should not exceed the principal plus 24 percent annual interest.

Also, when a student is threatened with physical violence to repay the loan amount, he or she should record the conversation on the phone and report it to the police in time, so that those issuing such threats can be held accountable.

Moreover, the students should learn to protect their personal information and privacy and be alert to hidden dangers while seeking such loans, and avoid the misuse of their personal information by other people, which can unwittingly get them involved in financial scandals.

The author teaches at the School of International Law, Southwest University of Political Science and Law.