EXPERTS say many victims fall prey to loan sharks unnecessarily as people in need of quick cash have several legal options.
Four kinds of financial organisations are allowed to make loans. They are: licensed banks, of which there are 164; restricted licensed banks, some of which do not finance personal loans; deposit-taking companies which, like restricted licensed banks, mostoften lend to corporations; and money lenders.
This means that in most circumstances the small borrower has only the banks or the money lenders to turn to.
There are 565 licensed money lenders throughout the territory whose rates are generally higher than the banks' but considerably lower than the loansharks.
People often use money lenders because they believe they cannot meet the banks' requirement for them to prove their ability to repay loans.
But secretary of the Hongkong Association of Banks (HKAB), Mr Steve Trooper, suggested many people did not realise they were eligible for bank loans.
''I'm sure there is a degree of ignorance as to general criteria which need to be met to borrow from a bank,'' he said.
Mr Trooper would not comment on the role of money lenders in Hongkong.
Mr Hui Yin-fat, Legislative Councillor and director of the Hongkong Council of Social Services, said the destructive side effects of money lenders' operations outweighed any productive effect.
''They do have some role to play, because there are always emergencies for people the banks will not loan to, and of course the Government has allowed them. But I am not in favour of money lenders,'' said Mr Hui, who last month spoke to the Legco SecurityPanel on the subject.
''Money should not be so easy to get - people only go to money lenders when they are desperate and borrowing from them usually plunges them into a worse plight.'' Experts give the following pointers to potential lenders: Money lenders' licences should be displayed in their offices.
The names of licence holders can be checked with the police register of money lenders.
Even when licensed, money lenders do not come under the scrutiny of the Commissioner for Banking.
Do not go to an unlicensed money lender, even when referred by a licensed money lender.
Always shop around for rates for the amount you wish to borrow and consider the term or repayment period.
Under law any interest over 48 per cent is ''extortionate'' and any demand of 60 per cent is ''illegal and unenforceable''.
Some banks require security or collateral as well as capacity to repay, but some do not - secured loans generally work out cheaper.
Always take into account regular and irregular monetary commitments when calculating your repayment capacity.
Plan for unexpected expenditure and if in difficulty repaying a loan talk to the bank as soon as possible.