With research suggesting that the number of illegal money-lenders operating in the UK continues to soar, read our handy guide to how to spot a loan shark and what to do if you fall victim to one. Our guide covers the definition of a loan shark, how to handle a loan shark as well as the steps you may take to identify a loan shark.
What is a loan shark?
A loan shark is an illegal money – lender who will typically offer cash instantly, in exchange for poor repayment terms and may threaten violence if money is not repaid according to their expectations.
Why loan sharks should be avoided
Loan sharks will typically offer loans on very bad terms to their ‘clients’. As such, in repaying a loan shark you stand little chance of actually being able to repay the loan and you will usually end up paying interest and being in a perpetual cycle of debt followed by rising repayments.
A loan shark will generally also exert undue pressure for ‘clients’ to borrow more money, for example they may suggest that another loan is taken out in order to repay existing debt.
Perhaps the best reason to avoid loan sharks is the consequences someone faces if they borrow money and cannot afford to repay it. A loan shark will pursue debts relentlessly, engaging in underhand tactics to reclaim the money loaned.
There is a sliding scale of severity in terms of the tactics some loan sharks will employ to retrieve money, with some resorting to mean intimidation tactics and invasion of privacy, to others who will resort to violence in order to scare people into making repayments. An example of intimidation tactics can range from ‘milder’ cases where debtors are threatened with ‘legal action’ and harsh legal consequences of non payment when in reality these have been made up, to loan sharks who threaten to ‘sell’ the debt on to people who will attack property and people in order to secure repayments.
Check if your lender is registered
All legal lenders within the UK need to be registered on what is called the Financial Services Register. Any lender who is not registered is an illegal lender and may be subject to prosecution or criminal sanction for operating an illegal money lending service. If you are in any doubt as to the credential of a lender, don’t take their word for it; ask them for proof they are a licensed lender, or check the Financial Services Register for free.
Consider whether a reputable lender can help
If you are in debt you may wish to think about approaching a licensed, reputable lender like Wonga. These types of lenders will display their credentials on their advertisements and will happily explain how you may double – check these. Our recommendation is to focus on the larger and substantially more ‘public’ loan providers as companies of this scale value PR much more than trying to hoodwink a few customers.
Don’t let a loan shark into your home
Loan sharks will frequently try to gain access to their victim’s home in order to resort to illegal tactics to recover the money. As such you should never let a loan shark into your home. You can install a ‘peephole’ on your front door, or a lock with a chain so that you can find out who is at the door without having to open the door fully, or at all. If you suspect that a loan shark or an agent of a loan shark is at your door you should remain calm and ask them to leave.
Report illegal money lending
Many people simply do not realise that it is an offence to lend someone money if you are not a regulated, registered lender. An illegal money-lender, or loan shark therefore has no legal authority to demand money to be repaid under any circumstances and if reported to the police an illegal money lender can be arrested and have property confiscated. There have even been some cases of loan sharks being asked to repay their victims or face being sent to prison.
Get independent financial advice
There are many agencies in the UK who offer free financial advice to people in debt. You should remember that being in debt is not a criminal offence and if you are in debt this is something that must be addressed responsibly. A debt counsellor can work out a budget for you and will advise you of legal procedures that protect your when under financial strain such as bankruptcy, an IVA or a Dent Management Plan. Similarly in Scotland there are many different ways to deal with your debt, a alternative to an IVA is a scottish trust deed that will allow you to lower your monthly debt payments and in some cases write part of your debt off.
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