Illegal lending: loan sharks

Loan sharks may start out appearing friendly. And if you keep up your repayments, they might stay that way.

But the reality is, even if you do, any money you borrow will come at a high price.

There are many risks attached to borrowing from a loan shark, for example:

• you pay far more in interest than you would through any legal borrowing
• you might be harassed or threatened if you get behind with your repayments (there have been reports of people being intimidated or attacked)
• you might be pressured into borrowing more money to repay one loan with another and end up in a spiral of debt that you can never repay.

Remember, if in doubt, check the lender out!

Anyone lending money must be authorised by the Financial Conduct Authority (FCA).

If you’ve already borrowed from a loan shark, the important thing to remember is you haven't broken the law and there is help available.

Here are some of the tell-tale signs to look out for that you might be borrowing from a loan shark:

• No paperwork – paperwork makes something seem more legitimate, and loan sharks avoid it at all costs.
• Cash loans or bank transfers – loan sharks normally prefer to deal in cash. However, more are now using bank transfers as well.  
• Refusing to give you information about the loan – most loan sharks will avoid giving you clear details about your loan, such as the interest rate, details of previous repayments and the total amount you owe.
• Taking possessions for security – some loan sharks will take personal possessions, such as a passport or bank cards, to act as security.
• Your loan keeps on growing – loan sharks might increase the debt or add extra charges at any time, even if you’re making regular payments. It’s important you get help because the debt can spiral out of control very quickly. Find out more on the Stop Loan Sharks
• Threats of violence – loan sharks often use intimidation and threats to frighten people into paying back their loan. Some even become violent towards their victims if they fail to pay.

The Financial Conduct Authority (FCA) keeps details of all authorised lenders.

If a lender isn’t listed as having current authorisation to lend money, don’t borrow money from them and don’t let them come into your home.

Although some loan sharks resort to intimidation and even violence, they’re not beyond the law.

Any lender – authorised or not – who harasses you is breaking the law.

Some loan sharks will threaten you by saying you’ll be prosecuted and even sent to prison if you don’t pay up.

This can’t happen – an unauthorised lender such as a loan shark doesn’t have the legal right to make you pay back the loan back at all. This is because the loan itself is illegal.

If you’ve been approached by someone you think is a loan shark, contact the police on 999 if you’re in immediate danger.

Loan sharks will never stop chasing you for money, so it’s important you take action as soon as possible.

Anything you tell them will be treated in the strictest confidence and you can remain anonymous. The loan shark won’t know they’re being investigated.

Find out how to report a loan shark at  GOV.UKOpens in a new window

You can also check if they’re a legal lender at  Loan SmartOpens in a new window

If your income is low, you have a poor credit rating or you only need a small amount for a short while, there are regulated lenders you can turn to instead of loan sharks.

Check they’re authorised by the FCA, and shop around for the best deal.

Credit unions are not-for-profit, member-owned, community savings and loans providers. They operate with three main aims:

• to provide loans at low rates of interest
• to encourage all members to save regularly
• to help members in need of financial advice and assistance.

You’ll have to become a member of the credit union and they might ask you to save an amount before you can borrow. 

If you’re short of money, make sure you’re getting all the benefits you are entitled to.

If you’re already claiming benefits, you might be entitled to a Budgeting Advance or Budgeting Loan.

If you’re thinking about using a loan shark because you can’t borrow money anywhere else, there are a number of organisations that offer free debt advice.