Following on from Stop Loan Sharks #AlliwantforChristmas campaign, we thought it would be good to educate our readers on the pitfalls of illegal lenders.
Loans sharks are individuals who lend money without authorization from the Prudential Regulation Authority (PRA) or Financial Conduct Authority (FCA). This means that they are unregulated and operate outside of the law. Loan sharks tend to target people with low income, who are in need of financial assistance and are unable to acquire credit anywhere else.
Borrowing from these types of lenders can have significant drawbacks that can not only harm your finances in the long run, but also put a major strain on your mental health and safety.
➔ Loan sharks tend to charge an incredibly high interest rate in comparison to high-street banks, credit unions and community banks. These high interest rates mean you’ll be paying back a lot more than you initially borrowed and can often result in a struggle to keep up with the repayments.
➔ Loan sharks are also notorious for using methods such as harassment, intimidation or threats if you fall behind on your payments. This can threaten the safety of your family whilst also putting a major strain on your mental health.
➔ In addition to threats, you may feel pressured to borrow even more money, to pay off the initial loan. This is a common tactic used by loan sharks to trap you in a debt cycle that can be incredibly difficult to break free from. So even if a loan shark seems friendly at first, just know that borrowing from them is NEVER a good idea.
We encourage people to use credit unions or community banks instead as they are authorised by the Prudential Regulation Authority (PRA) and regulated by the Financial Conduct Authority ensuring that they are always abiding by the law. They are ethical, non-for-profit lenders who aim to serve and uplift their community. With their focus being entirely on delivering a personalised service, they can truly help accommodate your situation.
If you think you’ve borrowed from a loan shark or are concerned for someone else, call Stop Loan Sharks 24/7 on 0300 555 2222, to safely report them and receive emotional and practical support tailored to your needs.