Learning how to avoid loan sharks is crucial if you want to keep safe and sound.
If you are planning to borrow money, you can protect your interests by making sure that you avoid this type of lender at all costs.
Loan sharks are illegal lenders.
First of all, they start off by appearing to be friendly towards vulnerable and helpless people.
They also often target low-income families. As a result, a small loan can spiral into unmanageable amounts and can lead to threats and abuse.
Today we’ll look at some obvious and some not so obvious clues to spotting a loan shark and how to keep your eyes open to them.
What is a loan shark?
In simple terms, loan sharks are lenders that typically charge extremely high levels of interest and usually work illegally.
This on its own is a bad enough situation, but loan sharks usually actively target the struggling and the desperate and can become aggressive, intimidating, unreasonable and even violent.
Loan sharks are not regulated professionally by teams and organisations such as the Financial Conduct Authority (FCA).
Loan sharks can work relatively anonymously, hard to track down, and may provide you with no paperwork or evidence that you can use to monitor or report their behaviour, which is why it’s absolutely vital to report any loan shark behaviour to the relevant authorities (ideally at the earliest possible stage).
How can I spot a loan shark?
- Loan sharks will never offer any paperwork or a signed agreement. Hence there will usually be no trace of any written contract to call upon if problems arise.
- They will refuse to disclose any information about interest rates. Which allows them to increase the debt to any amount they want to, without giving you any fair warning.
- Loan sharks rarely advertise their services in public. Most of all, they get their business through word of mouth advertising and recommendations. For a good example, Bob down at the local pub could be a loan shark.
- In some cases they may confiscate items as security against your loan. Some unfortunate victims have had to hand out passports, personal possessions and their cars.
- They will do their utmost to make sure the customer doesn’t get to settle their debt. Therefore hidden costs are almost always never mentioned. Miss G’s story is one of many such incidents. She borrowed £3500 from a loan shark to support her family. She paid back double this amount and still owed another £6000. Miss G is one of hundreds of victims of loan sharks, and the amount due could rise to unfathomable amounts.
- A loan shark may resort to intimidating you and even threaten your life or family.
How can you avoid loan sharks?
- Even if you’re feeling desperate and are concerned that you won’t pass the scrutiny of a credit check, you should only attempt to apply for loans from professional and trustworthy sources.
- Visit websites like the Financial Conduct Authority FCA Register can help to verify the legitimacy of any loan provider. The FCA Register lists all approved lenders.
- Make sure that your loan application details how much you’ll be expected to pay back overall.
- Don’t ever enter into any kind of loan agreement with a cold caller, in person or by phone. Do not pay any fees up front and don’t accept money, or hand over your bank details, without verifying the caller’s information.
- When confirming a loan agreement, always ensure that you have thorough written documentation and that you’ve read it and understand it. Never sign a loan contract without understanding how much you’re borrowing and what the repayment terms are.
- Remember that no professional loan company will ask for your belongings as collateral. Don’t deal with a loan provider that asks you to supply your driving license, your passport or any other items in your possession.
What to do if you are a victim of a loan shark
Prevention is better than cure. It is important to do all you can to avoid getting involved in a loan shark scam.
If you are already borrowing money from a loan shark, then you can take the following steps:
Continue to repay your loan
If you are planning to take action, you should continue to repay your loan.
A sudden change in your behaviour may alert the loan shark to the possibility that you are ready to report them. It might also encourage an increase in threatening behaviour and harassment.
Once you have taken the recommended action, you will be provided with the help that you need to stop paying your debt. Until then, it is best to continue with your existing repayment routines.
Report a loan shark
Illegal Money Lending Teams can investigate and prosecute loan sharks.
The teams include victim support officers so that you are not left on your own after filing your report.
You will receive continued help and advice, to ensure that you feel safe and do not lose any more money.
You do not have to be a loan shark victim in order to file a report. If you believe that you know of someone that is lending money illegally, you can report them to the Illegal Money Lending Team in their country of operation.
Remember that loan sharks are acting illegally and so you should report any concerns that you have.
Avoid loan sharks by taking a proactive approach to finding a loan and by checking that you’re using secure websites, registered loan providers and lenders that provide detailed and thorough documentation.