Loan sharks are illegal lenders who often target low income and desperate families. They may seem friendly at first but borrowing from them is never a good idea – even if your credit rating is poor or you only need a small amount for a short while.
Loan sharks will start out being friendly. And if you keep up your repayments, they will stay that way. But the reality is, even if you do, any money you borrow will come at a high price. Loan sharks gain complete control of the victims and their finances.
There are many risks attached to borrowing from a loan sharks.
You pay far more in interest than you would through any legal borrowing. One woman who borrowed £500 ended up repaying £88,000.
You may be harassed if you get behind with your repayments. You are often pressured into borrowing more money to repay one debt with another.
A loan shark may:
The Financial Conduct Authority (FCA) keeps details of all licensed lenders, as well as everyone who has applied for a licence or has had one taken away or suspended. If a lender isn’t listed as having a current licence, don’t borrow money from them and don’t let them come into your home. Loan sharks offer loans without the correct permission from the FCA and as such, are breaking the law.
Although some loan sharks resort to intimidation and even violence, they are not beyond the law. Any lender – licensed or unlicensed – who harasses you is breaking the law. Some loan sharks will threaten you by saying you will be prosecuted and even sent to prison if you don’t pay up. This can’t happen – an unlicensed lender such as a loan shark has no legal right to recover the debt.
In fact, they have no legal right to make you pay the loan back at all – because the loan is illegal.
If you've borrowed money from a loan shark, the most important things to remember are:
You've not done anything illegal and you won't get in trouble with the police.
It's illegal to lend money without a licence, but it is not illegal to borrow money from a loan shark.
You don't have to pay the money back.
If the money was lent illegally, the loan shark has no legal right to collect it and they can't take you to court to get it back.
Don't stop paying a loan shark if you're worried about your safety. Get advice from a specialist before you make a decision.
You can get expert, confidential help by contacting the specialist teams at Trading Standards:
These teams are experts at dealing with loan sharks. They can give you advice on your options, whether to stop payments, and what to do next. You can contact them confidentially and you don't need to give your name.
Alternatives to loan sharks
If your income is low, you have a poor credit rating or you only need a small amount for a short while, there are still reputable lenders you can turn to instead of loan sharks.
Credit unions - If you’re on a low income or you need to improve your credit rating and you need to borrow a small amount for a short time, look into borrowing from a credit union. You will generally have to join first and some credit unions may ask you to save a small amount before you can borrow. (for more information on Credit Unions please refer to our Credit Union leaflet
Help from the government – make sure you are getting all of the benefits you are entitled to. Use an independent benefits calculator to find out what benefits you could get and how to claim. These are free to use and anonymous. For more information go to Benefits-calculators
Budgeting Loans - If you desperately need to borrow money, you may be able to apply for an interest-free Budgeting Loan from the Social Fund. Alternatively, other help may be available from your local authority in England, or the Scottish and Welsh governments. For more information
If you’re thinking about using a loan shark because you can’t borrow money anywhere else, there are a number of organisations which offer free debt advice:
03444 111 444
StepChange Debt Charity
0800 138 1111
0808 808 4000