If money is tight, the offer of a loan might sound tempting. But make sure you don't become loan shark bait...
The bills seem to be all arriving at once. Your purse is empty and there isn’t any money left to pay for next week’s food bill. You desperately need money and you need it quick.
A neighbour who lives down the street has told you about a man who calls every Wednesday and he can lend money, no questions asked. They have just bought a new TV and a three piece suite with money loaned from him.
You invite the man to call to your house, and by the time you’ve had a cup of tea and handed out the custard creams you’re £500 better off. He even said he would collect the payments every week and if you needed more cash, you could get a top up.
It was so easy!
You didn’t check the interest and you didn’t find out whether he was regulated by the Office of Fair Trading. And you got the money you so desperately needed with no proof of earnings and no credit checks. There was no paperwork to fill in.
So everything is fine until you realise that you seem to be repaying the debt forever and the balance isn’t going down. You borrow more to pay off the balance which just seems to grow week by week and so the downward spiral begins. When you start to default on your payments because they’re no longer affordable, the threats of violence begin.
You realise you’re now entangled in the ever-tightening net of the dreaded loan shark and it’s very scary. You have become loan shark bait!
You’re afraid to tell anyone and start to make up excuses to borrow from friends and family just to keep up the payments. But what do you do next when the money really runs out?
Loan sharking is the practice of lending money to desperate people at extremely high and illegal rates of interest.
The recession has left many families struggling to make ends meet and open to abuse by these rogue door step lenders. They are often well known in the community and research their customers well.
Also known as shylocks, they make a big profit from people who can't get loans from legitimate sources such as banks or other lending institutions.
They’re feared the world over; for example, one of the money-collecting tactics of the loan sharks in Malaysia and Singapore is to hang a pig’s head outside the debtor’s door as a type of intimidation and way of marking them as a defaulter. They also break into the debtor’s property to steal goods to pay off the debt.
Wherever you live, loan sharks offer unsecured loans at high interest rates to individuals, often enforcing repayment by blackmail or threats of violence. To be caught in their clutches can be extremely frightening.
According to the OFT there are an estimated 165,000 households in the UK using loan sharks, with half of these in the most deprived social housing areas. Loan sharks usually target low income families, people with poor credit ratings who are unable to get loans from high street banks and the elderly, but anyone who is desperate for money can be a victim of these illegal lenders.
What you need to know about loan sharks:
- Never, ever borrow from a loan shark. In fact, never borrow from anyone until you’ve checked they are regulated by the Office of Fair Trading (OFT)
- You can check if someone has a licence by using the online “Consumer Credit Register” search on the OFT's website
- If you have borrowed money from a loan shark there is no legal obligation to pay the debt back. Someone lending money without a licence can’t enforce a debt.
- You should contact your local Trading Standards office immediately if you are being threatened. They will help you deal with your situation and the loan shark.
- Report a loan shark. If you know someone who has been a victim of a loan shark you can contact direct.gov.uk in confidence for further help.
- If you’re struggling to raise some cash and have been turned down by the banks, try a credit union
Find out more in Don’t become loan shark bait.
Have you been the victim of a loan shark? Are you struggling with bills you can’t pay?
If you’d like further help you can use our online debt advice facility Debt Remedy or contact us.