Money Advice Service

Loan sharks are illegal lenders who often target low income and desperate families. They may seem friendly at first but borrowing from them is never a good idea – even if your credit rating is poor or you only need a small amount for a short while.

Why loan sharks are bad


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

Loan sharks will start out being friendly. And if you keep up your repayments, they will 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.

  • You pay far more in interest than you would through any legal borrowing. One woman who borrowed £500 ended up repaying £88,000.
  • You may be harassed if you get behind with your repayments.
  • You are often pressured into borrowing more money to repay one debt with another.

How to spot a loan shark

A loan shark may:

  • offer little or no paperwork, such as a licence, credit agreement or record of payments
  • increase the debt or add additional amounts to it without your permission
  • refuse to give information, such as the interest rate or how much you still owe
  • take items as security, such as passports, bank cards or driving licences
  • not allow you to settle your debt, or
  • get nasty – they may resort to intimidation, threats or violence

How to check a lender is legitimate

The Office of Fair Trading’s Consumer Credit Register lists licensed lenders, as well as everyone who has applied for a licence or has had one taken away or suspended. If a lender isn't listed as having a current licence, don't borrow money from them and don’t let them come into your home.

You can search the Consumer Credit Register online

Loan sharks and the law

Although some loan sharks resort to intimidation and even violence, they are not beyond the law. Any lender – licensed or unlicensed – 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 unlicensed 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.

There's information on how to report a loan shark on the website

Report loan sharks in Scotland by contacting in confidence the Scottish Illegal Money Lending Unit

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 still reputable lenders you can turn to instead of loan sharks.

Credit unions

If you're on a low income or you need to improve your credit rating and you need to borrow a small amount for a short time, look into borrowing from a credit union. You will generally have to join first and some credit unions may ask you to save a small amount before you can borrow.

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 may be able to apply for an interest-free Budgeting Loan from the Social Fund. Alternatively, other help may 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, such as Citizens Advice and the Consumer Credit Counselling Service.

Where to go to get free debt advice

This article is provided by the Money Advice Service.


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