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Loan sharks can be a concern for anyone that’s applying to borrow money, but what exactly is a loan shark and how can you protect yourself?
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, but teams and organisations such as the Financial Conduct Authority (FCA) and Illegal Money Lending Team are working to raise awareness and to identify illegal lenders.
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 you tell if you’re dealing with a loan shark?
Alongside not necessarily providing any paperwork, loan sharks may take a door-to-door approach to lending money. They might ask for you to hand over personal belongings that they will use as ‘security’ whilst you owe them money.
Loan sharks can be evasive or sneaky, adding money onto your debt without your knowledge or being deliberately quiet regarding interest rates and how much you currently owe.
How can you avoid loan sharks?
Only apply for loans from regulated loan providers, either directly or through a regulated broker or loan comparison service. 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 Services Authority FSA Register to verify the legitimacy of any loan provider. The FSA Register lists all approved lenders.
– Make sure that your loan application details how much you’ll be expected to pay back overall.
– In the unlikely event that your loan application is rejected by all of the potential loan providers when you run a loan comparison search, do not resort to using a loan shark. You can get debt advice from services such as Citizens Advice and StepChange.
– 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.
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.