It is estimated that thousands of families in the UK have taken cheap and secured loans issued by loan sharks during the recession in 2010. Loan sharks, who are unlicensed money lenders, are not regulated by the financial service authority and are willing to lend money to anyone at astronomical interest rates. Interest rates can be as high as 1000% and loan sharks are always the last option for the most financially desperate people.
The value of the loans is estimated to be between £50 and £500 at an average interest rate of 825% which forces lenders to pay back more than three times the initial amount they borrowed.
Although people know that they will have to pay back more than triple the amount of money they borrow, the UK money lending market has left them with no other options. As low income families tend to have the poorest credit ratings, those families will be often refused credits from banks and credit cards.
In one of the worst case scenarios, it is reported that a loan shark lent a couple of £500 and forced them to pay back nearly £90,000 over seven years.
In a campaign to tackle loan sharks, the Government has set up a national helpline offering confidential advice to people who have fallen victims to the illegal lending market. People can get help and support by dialling 0300 555 2222. There is also an informational website available for those who want to learn more about how to deal with loan sharks at www.direct.gov.uk/stoploansharks.
Consumers are urged to report loan sharks to the police or the Department of Trade and Industry as soon as possible.