From festive gifts to family outings, the costs of Christmas can pile up — especially with rising energy prices this winter. It’s a time when you might find yourself needing some extra cash.
Lately, we’ve seen a rise in reports of people resorting to loan sharks. 2024 figures from the Centre for Social Justice (CSJ) estimated that there are around 1.1 million people in England in debt to illegal money lenders. It’s crucial to steer clear of these illegal lenders during your financial pinch. We’re here to help you make safe and smart choices, ensuring your holiday season remains merry and bright.
Let’s explore how to avoid loan sharks and opt for trusted, reputable lenders if you need a short-term loan to manage holiday expenses. Together, we can ensure you navigate this festive season safely and wisely.
What is a loan shark?
Loan sharks are illegal money lenders that operate outside of the official banking system. They often target vulnerable individuals, offering quick loans at high-interest rates. These lenders are known for aggressive tactics, such as intimidation and violence, to collect debts. Loan sharks operate outside of the law and they will therefore avoid leaving a paper trail. This usually means little or no documentation regarding the loan and repayments being required in cash.
Unfortunately, loan sharks will often target and exploit vulnerable people who are unable to pay back what they borrow. This can lead to further borrowing and a seemingly endless pattern of borrowing to service debt.
Spotting a loan shark
It is surprisingly easy to fall victim to the activities of a loan shark. Loan sharks will use underhand tactics and pressure you into agreeing to a loan often without you fully understanding the terms and conditions. Unfortunately, once you have taken a loan, the situation can very quickly escalate.
Some victims of loan sharks report receiving over 150 text messages a day demanding repayments, with visits to their homes and workplaces also common. This level of harassment can become very distressing, especially if you begin to feel physically threatened and you have children with you.
It’s important to remember that loan sharks prey on those in vulnerable situations and rely on the fact that you will struggle to pay back what you have borrowed on time. Many victims report paying back hundreds or thousands of pounds more than they borrowed due to ever-increasing demands and financial penalties for missed ‘repayments’. Whilst struggling to meet the payment demands of loan sharks, other everyday living expenses, such as paying rent or buying food, can fall by the wayside. The impact can very quickly have an adverse effect on your mental and physical health, with one loan shark victim describing her experience as ‘a living hell’.
Recognising when you are being targeted by a loan shark is a crucial first step in protecting yourself from falling victim to their unscrupulous practices. If you suspect or encounter loan shark activities, report them to the police. Taking a loan from a loan shark is not illegal, but by reporting the loan shark, you may be able to prevent others being targeted in the future. You can remain anonymous and protect yourself and others.
Tips for avoiding loan sharks
Here are a few practical tips to help you avoid loan sharks:
Turn to a trusted lender
Instead of resorting to loan sharks, consider a short-term loan from a trusted source, such as a credit union. Credit unions are not-for profit, meaning their approach to lending is much more ethical. This usually means fair interest rates and better terms that allows for affordable repayments, avoiding entering into a spiral of debt.
Research lenders
Before taking out a loan, research the lender thoroughly to ensure they are legitimate and adhere to legal regulations. Check online reviews, ask for references, and verify their credentials. Legitimate lenders are regulated by the Financial Conduct Authority (FCA) and will have a license number that you can check online.
Avoid unsolicited offers for loans
Loan sharks often target individuals who respond to unsolicited offers. Avoid dealing with lenders who contact you through unexpected methods such as cold calls, emails or via social media.
Read the terms and conditions
Before signing any loan agreement, carefully read the terms and conditions, including the interest rate, repayment terms, and any additional fees or charges.
Seek professional advice
If you’re struggling with financial difficulties, consider seeking advice from Money Helper. They can provide valuable guidance and help you make informed decisions.
Budgeting and savings
Practice responsible financial habits by budgeting and saving a portion of your income. This can help you avoid relying on loans during difficult times.
Look at your bill timings
Overdrafts are there for emergencies, and needing to use an overdraft is common to cover bills. But if heading into overdraft is a regular occurrence, consider moving the timings of any bills or direct debits to times in the month when cash flow is better.
Safe short-term loans from GMBCU
Use trusted and reputable lenders for short-term loans. By being aware of the signs of loan sharks, you can protect yourself from falling victim to unscrupulous, illegal practices that can quickly and easily lead to further debt issues.
GMB members can apply for loans quickly and easily through our website. The benefits of borrowing from your own Credit Union include:
- Affordable interest rates
• Repayment terms to suit individual circumstances
• Flexibility, with the ability to top up existing loans
• No loan fees
• No early repayment charges
• Interest charged on decreasing loan balance
• Paperwork kept to a minimum
With a range of loans available to match your needs, we’ll support you in making the right decision. Discover more here.
You can access our online support anytime to discuss any financial concerns you may have.
If this article has raised any concerns or if you would like to discuss your options, please get in touch.