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How to Spot Loan Sharks (And Alternatives for Emergency Finance)

Jennifer Birtles 27th Aug 2020 No Comments

Reading Time: 5 minutes

If you’re struggling with debt, or can’t find enough cash to pay the bills, it can seem like there’s no options left. Especially with a poor credit score, or low income. Without the right financial circumstances and stability, it’s hard to get credit from legitimate lenders. Leaving more and more people to fall into the laps of loan sharks, and spiral into debt.

What are Loan Sharks?

What are loan sharks?

Loan sharks are a type of illegal, unlicensed money lender. They target vulnerable people who find themselves in desperate financial situations. Offering out loans to people with extortionate interest rates and unfair, illegal repayment terms.

Loan sharks work outside the law and can be fined or prosecuted if caught. As they’re not authorised or regulated, they’re making their own rules. In many cases, this means loan sharks are enforcing repayments through blackmail, threats, and physical violence to the borrower and their loved ones.

The overwhelmingly high interest rates that loan sharks give mean there’s a chance you’ll never be able to pay everything. Many loan sharks will encourage you to take out another separate loan in order to afford repayments on the first one. There’s no end to this, and it leads so many people into a spiral of debt.

Tips to Spot Loan Sharks

Unfortunately, loan sharks can be anyone, which makes them hard to spot. You might work with a loan shark, or drink with one in the pub. However, there are plenty of warning signs to look out for to protect yourself and others.

Look Out for…

If you’re looking for a loan or financial support, be wary of anyone that matches some of the criteria below. If in doubt you can always check if a lender is registered with the FCA here.

  • No paperwork – Paperwork makes something more legitimate, and loan sharks avoid it at all costs! If you’re taking out a loan make sure you always get a credit agreement, or have a record of payments.
  • Cash loans – Loan sharks use unregulated and illegitimate ways of lending money.
  • Taking possessions for security – Some loan sharks will hold personal possessions, such as a passport or bank cards, to act as security and ensure you make repayments.
  • Limited information – Most loan sharks avoid giving you coherent information. With any reputable lender, details about your interest rate, previous repayments, and total sum will always be easily accessible.
  • No FCA register number – Legitimate lenders are regulated by the FCA and are given an authorised register number. This should be listed on their website, but if you can’t find it, ask the lender themselves. They should be able to provide it for you and if they can’t, stay clear!
  • Did they contact you? If someone gets in contact with you offering a loan, they’re likely a loan shark or fraudster. Regulated lenders won’t reach out to you directly.

Loan sharks are also notorious for using intimidation, threats, and physical violence. Unfortunately many people don’t know this until they’re already involved with a loan shark. But no matter who has loaned you money, even if it’s an informal loan from someone you know, if anyone threatens or hurts you, you need to report it to the police immediately.

Loan Sharks and the Law

Loan shark loans are running an illegal money lending practice, and need to be reported. However, the problem for lots of people is the fear of reporting a loan shark and what will happen to them. Listed below are the contact details for the relevant authorities across the UK. They’re professionally trained at handling these situations and everything can be done anonymously.

Remember, with loan sharks you are not in the wrong, they are. You haven’t broken the law by borrowing from them. There’s also actually no legal obligation to pay the loan back as it was’t legal or authorised. The sooner you report a loan shark, the sooner you’ll be free of them.

Reporting Loan Sharks

England Illegal Money Lending Team

0300 555 2222

[email protected]

WalesIllegal Money Lending Unit

0300 123 3311

[email protected]

Scotland Trading Standards Scotland

0800 074 0878

Northern Ireland Consumerline at Trading Standards Service

0300 123 6262

Other Alternatives

Try alternatives to loan sharks

Often people who resort to loan sharks feel that there are no other options available to them, but there is! Loan sharks only get you into more trouble and should never be used.

Credit Unions

Credit unions are for groups of people with something in common. It can be anything – you all work in the same job, or live in the same area. It’s always worth looking into if you can join a credit union near you. They  They tend to offer much lower rates of interest, and can also offer financial advice.

Check out Find Your Credit Union to join one now.

Credit Cards

These tend to have high APR rates, so although you don’t want to regularly rely on credit cards for loans they can be useful in emergencies. Ideally, credit cards are useful for short-term borrowing. But always keep in mind your APR rate and how this will add up with compound interest.

Bank Overdrafts

All interest on overdrafts is now charged as a single annual interest rate (APR). Generally, depending on the bank, these are range from anywhere between 20 and 40%. This can provide a good solution for very short term problems with a lack of cash. However, like credit cards, the amount you’ll owe accumulates quickly if you don’t keep on top of it.


Lots of charities and funds offer non-repayable grants to people experiencing financial hardship. Check out our article Strangest Grants Available to find some of the weirdest grants around. Alternatively, head to Turn2Us to see if there’s any grants you can apply for here.

Budgeting loan

A Budgeting Loan is extra money on top of your benefits to help pay for certain essentials. This could include anything like paying for essential household items, rent, or maternity costs.

You’re generally eligible if you’re already on benefits and have been for a six months or more. The great thing about a budgeting loan is you only pay back what you borrow, there’s no additional interest.

Government help and Benefits

Use a benefit calculator to check if you’re receiving all the benefits you’re entitled to.

Also, a lot of local councils run Welfare Assistance Schemes, available to be people on a low income who’re facing financial difficulty. Help can be offered in numerous ways, including small cash loans and grants. What you’re entitled to and who you need to get in touch with depends on what part of the UK you live in.

England – find your local council

Wales – apply to the Discretionary Assistance Fund

Scotland – get in touch with the Scottish Welfare Fund

Northern Ireland – apply for Finance Support.

Check out Finding Finance, a site where you can find responsible and fair money lenders, when the banks won’t help. Or find even more alternatives to a bank loan over here.

Useful Resources and Reading

There are places you can turn to if you need help or advice concerning debt or loans. Turn2Us and StepChange are both excellent UK debt charities, providing support and constructive help on how to manage debt, and what steps you can take to get back on track.

Plus, housing associations, local authorities and councils, and charitable organisations, are often able to help out people in severe debt. Reach out to your local one, explaining your circumstances, and find what help is available to you.

More debt management articles

If you’re struggling with debt, try these articles next.

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Jasmine Birtles

Your money-making expert. Financial journalist, TV and radio personality.

Jasmine Birtles

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