For various reasons, some loan companies may be reluctant to lend to you, perhaps because you’ve missed payments in the past or if you haven’t borrowed much before. This is where some people turn to loan sharks, or unregulated credit agents, to borrow money. The problem is that often these lenders do not work within the law, and although they present what may feel like an opportunity or a solution at the time, you could find that it was a bad decision when things start going wrong.
Being in debt is something which none of us do because we like owing money, but because it gives us the opportunity to reach a bigger goal. Debt, when managed properly, can be a useful tool for many households, giving people the opportunity to get on the property ladder, buy a new car, afford a holiday or start a business without having to save for years on end.
When it comes to borrowing money, however, you’re often judged on your previous ability to pay it back, which is based on information held on your credit file. For various reasons, some loan companies may be reluctant to lend to you, perhaps because you’ve missed payments in the past or if you haven’t borrowed much before. This is where some people turn to loan sharks, or unregulated credit agents, to borrow money.
The problem is that often these lenders do not work within the law, and although they present what may feel like an opportunity or a solution at the time, you could find that it was a bad decision when things start going wrong. And as loan sharks operate in an unregulated, lawless fashion, you’ve got no backup when things take a turn for the worse.
How Can I Recognise A Loan Shark?
Loan sharks can be difficult to spot, as they sometimes make out like they’re a professional, friendly outfit. This all changes once you actually borrow money from them, and you could be harassed, threatened or even experience violent behaviour if you’re unable to pay.
This can be a common problem with loan sharks, as they are in fact criminals who are simply out to get as much money out of their victims as possible. It can be easy to have the wool pulled over your eyes at the beginning, but once you’re involved the mood may change and you could find it very hard to get out.
Loan sharks operate in many different arenas, from small loan shops to people’s doorsteps. They are not regulated by the FCA and therefore do not practice the code of conduct and fair lending rules. Of course, often the police will manage to stop and prosecute loan sharks, but they can very often evade the law for quite some time, affecting many people in the process. The defining feature of a loan from a loan shark is that it has extremely high interest rates, where you will end up paying back much, much more than you originally borrowed. The payment schedule may be designed to make it as difficult for you to pay as possible.
This, as well as affecting your stress levels, can lead to the loan shark persuading you to borrow more to cover the current debt, thus leading you into a debt spiral.
Loan sharks can be characterised by the following:
What Should I Do If I Am Threatened?
If you’re worried that you or someone you know is involved with a loan shark, it’s important to tell the authorities as soon as you can. If you are being threatened or have experienced violence, then call the police in the first instance. If you feel in any danger at all, then always notify the police. It’s better to be safe than sorry.
A loan shark may tell you that you will go to prison if you don’t pay them what you owe, which can be a very scary concept. However, because the loan sharks are not operating within the law and finance regulations, you do not legally have to pay them anything. The loan is illegal and therefore you have no legal commitment to pay it back. This is especially true if no contract was drawn up.
If you think that a lender is not authorised by the FCA (Financial Conduct Authority) and should not be trading, you can check the Financial Services Register for their name. Remember that the trading name of some lenders is different to what they’d be registered with for the FCA. Any lender who is above the law will be happy to provide you with information and proof that they’re able to legally lend you money.
Alternatively, call the Illegal Money Lending Team in your district (see contact details here) for guidance and advice and to report any loan sharks. You will not get into trouble for borrowing from them and your call will be treated seriously.
Are There Alternatives?
Credit unions, guarantor loans and emergency help are all viable alternatives to loan sharks, depending on your situation, how much you need to borrow and what for. If you’re unsure what to do next, visit your local Citizens Advice Bureau for some free, personalised help.
Guarantormyloan is the only direct lender in UK offering one month’s equivalent as cashback on full and timely repayment of your guarantor loan. Learn more about our guarantor loans here and about our loan cashback here.
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