With the cost of living crisis fuelling high interest rates and inflation, Britons are increasingly turning to extreme measures to help pay their bills.
Recent months have seen energy bills soaring and food prices rising, resulting in over a million people in the UK seeking help from loan sharks, according to research from the Vulnerability Registration Service (VRS).
In total, 1.2 million adults have reached out to “unscrupulous” loan sharks in the last 12 months.
It comes as separate research from the Money Advice Trust found that around one in five (21%) Britons are estimated to be behind on at least one household bill.
More polling for Citizen’s Advice of 6,000 UK adults in May and June found that one in four people have borrowed money to pay for essential costs in the last six months.
It said more than 25% of the population reported being in debt, excluding mortgage and car finance payments, rising to 45% of families with children and 56% of people receiving Universal Credit.
And more people are resorting to borrowing money from friends, family and illegal loan sharks, it warned.
Tony Quigley, head of the England illegal money lending team at VRS, warned: ”Loan sharks are predatory, exploitive and dangerous.
"They lure victims in with false promises and a seemingly safe place to turn for help, but once you are in, these unscrupulous lenders trap you into a cycle of debt and make it as hard as possible for you to escape.”
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What is a loan shark?
Loan sharks are lenders of money who are not authorised to do so by the Financial Conduct Authority (FCA). Therefore they are running illegal money-lending operations, often from homes, and charge extremely high rates of interest for repayments.
How high are the interest rates?
Interest rates vary from loan shark to loan shark but a typical figure is between 300% and 400%. Arrangements are not covered by legal paperwork and the terms of repayment can be changed without warning.
Are loan sharks dangerous?
Loan sharks are running illegal operations and as a result, may resort to intimidating tactics to collect money from people they lend to. Customers are often threatened with violence at their own homes if they cannot make repayments. People may also have their credit cards or valuables taken away if they are unable to provide cash payments, while others may be forced into crime on behalf of the loan sharks.
Why do people use loan sharks?
People in financial difficulties may need money quickly and may have been turned down for loans with banks due to bad credit ratings. With bills racking up, people may resort to risky methods to boost their bank balance, worrying about the consequences of dealing with illegal money lenders at a later date.
How can you tell if a money lender is legal?
The register on the FCA website will tell you if a money lender is authorised. It is important to note that if you borrow money from a loan shark, you have not broken the law – they have.
Where can you turn if you are in financial difficulty?
The Citizens Advice Bureau can give advice if you are in debt, or if you are considering using a loan shark. You can also contact the FCA for help if you owe money to a loan shark. The Money Advice Service has more information on borrowing and managing money.