The past few years have left many of us in the UK in worse financial situations, and whilst it’s always good to be proactive and try to take steps to solve financial problems, it’s important to be aware of the dangers of some methods.
In this article, we explain what a loan shark is, why they’re dangerous, what you should do if you’re already involved with one, and alternative options to help you avoid them.
What is a loan shark?
To legally lend money in the UK, a lender must have the correct permissions and authorisation from the Financial Conduct Authority (FCA). If someone doesn’t have this, they’re lending money illegally and are therefore classed as a loan shark.
Loan sharks will often charge very high interest rates and may not have the most formal process. They won’t give you as much information as an authorised loan provider would because most of the information you receive is a regulatory requirement.
People will usually go to loan sharks as a last resort if their credit score doesn’t allow them to take out a mainstream loan, meaning loan sharks are able to prey on people in desperate situations and take advantage of this.
Is it illegal to borrow money from friends and family?
Although they probably won’t be FCA-regulated, you are allowed to borrow money from friends and family. One-off, informal loans are not illegal and don’t need to comply with FCA regulations.
Why are loan sharks dangerous?
As previously mentioned, loan sharks often offer loans with very high interest rates, making them extremely difficult to pay back and usually landing people in a much worse financial situation in the long run.
If you’re unable to repay your debts to a loan shark, it’s highly likely that they will resort to illegal measures to attempt to force you into repaying your debts. At this point, many people are worried about contacting the police as they think they’ll be in trouble for taking out the loan – forcing them into difficult situations to repay the debts.
I’m struggling with a loan from a loan shark, what should I do?
If you’ve taken out a loan and you’re unsure whether your loan provider is fully authorised to loan money, you can check whether they’re on the Financial Services Register.
If you’re struggling to repay a loan from a loan shark and they threaten to take legal action if you don’t repay them, do not worry – unauthorised lenders can’t take legal action as they are breaking the law themselves to lend the money.
If you’re struggling to repay a loan shark and have received threats, the best thing to do is to contact the police.
How do I report a loan shark?
You can report loan sharks anonymously over the phone or online.
If you’re in England, report loan sharks online to Stop Loan Sharks. Alternatively, you can call them on 0300 555 2222.
If you’re in Wales, you should report loan sharks to the Wales Illegal Money Lending Unit by calling 0300 123 3311.
If you need to report a loan shark in Northern Ireland, contact Trading Standards Consumerline. This can be done online or by calling 0300 123 6262.
For Scottish residents, please contact Trading Standards Scotland to report a loan shark online or over the phone by calling 0800 074 0878.
I’ve considered using a loan shark – what are my alternatives?
Most people who resort to borrowing from loan sharks do so because they think that there are no other options. If you can’t get a loan from an authorised lender and you’re struggling with debt, it can sometimes seem like the best option – this is because loan sharks prey on those in difficult circumstances.
If you’re struggling with debt and you’re worried about your financial situation, please contact PayPlan and speak to our team for free. Whether you just need some advice or wish to set up a debt solution to help you regain control of your finances, our expert advisers are available to support you.
Contact PayPlan for free on 0800 316 1833 to get started.