Money Advice Service

Loan sharks are illegal lenders who often target low income and desperate families. They might seem friendly at first but borrowing from them is never a good idea – even if you feel you have no other options.

Why loan sharks are bad

Warning!

Some loan sharks have attempted to charge interest rates as high as 719,000% Source: BBC news story

Loan sharks will 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 very high price.

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

  • You pay far more in interest than you would through any legal borrowing. One woman who borrowed £500 ended up repaying £88,000
  • 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.

How to spot a loan shark

A loan shark might:

  • Offer little or no paperwork, such as a credit agreement or record of payments
  • Refuse to give information, such as the interest rate or how much you owe
  • Take items as security, such as passports, bank cards or driving licences
  • Increase the debt or add additional charges at any time
  • Refuse to allow you to settle your debt
  • Get nasty - they might resort to intimidation, threats or violence

How to check a lender is legitimate

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

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

Check the FCA Financial Services Register to see if a lender is authorised.

Loan sharks and the law

Although some loan sharks resort to intimidation and even violence, they are 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 will 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 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.

Reporting a loan shark

If you have been approached by someone you think is a loan shark, you need to report them and contact the police if you are in immediate danger.

Find out how to report a loan shark on the GOV.UK website

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 reputable lenders you can turn to instead of loan sharks.

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

Credit unions

Look into borrowing from a credit union - although you will have to become a member and they might ask you to save an amount before you can borrow.

Find out more on Borrowing from a credit union

Help from the government

If you are short of money, ensure you are getting all of the benefits you are entitled to.

Make sure you’re getting the right entitlements

If you desperately need to borrow money, you might be able to apply for an interest-free Budgeting Loan from the Social Fund.

Alternatively, other help might be available from your local authority in England, or the Scottish and Welsh governments.

Budgeting Loans from the Social Fund

Dealing with debt

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.

Where to go to get free debt advice

This article is provided by the Money Advice Service.