An illegal lender that offers money to borrowers for profits without reporting to the consumer credit license is commonly referred to as a loan shark. Desperate people that don’t have enough liquid cash to manage everyday expenses often ask for it from such a lender.
According to a source, a loan is a criminal; however, the borrower is not. However, people should not confuse them with friends or family members that lend money to provide financial aid. Moreover, informal agreement with such people is not regulated by the FCA.
Also, a friend or family member can pursue an illegal action for collecting money. These should exclude activities like threatening the family, violence, taking goods as payments or security, etc. But they can take a person to court and pursue through legal hearings.
There are many different ways to identify a loan shark. For example, they don’t offer a formal agreement or paperwork, refuse loan information, keep things as security, accrue things for missing payments, etc. Additionally, they even take recurring interests or charges and use intimidation or violence for payments.
5 Ways to Avoid Loan Sharks
● Save Money Regularly
The easiest method of avoiding loan sharks or borrowing money from unknown lenders is by saving money regularly. However, most people fail to accomplish this goal and require emergency funds, especially during Christmas.
Fortunately, there are many ways of saving money. Primarily, shift the existing debt to a zero-interest balance transfer credit. Also, make sure that the card offers the best interest rates post promotional period.
By doing so, you would stop accruing interest on repayments made to the credit card. But it is necessary to clear repayments for the debt before the promotional tenure finishes because they have high-interest rates.
Similarly, a few banks offer interest-free overdrafts. Therefore, you can avail the money and pay the debt in instalments with no additional charges. For example, First Direct and M&S Bank offered this deal last year.
Likewise, reducing tax, signing up for loyalty cards, cancelling unused scheduled debits, planning expenditures, haggling, bulk buying, etc., can save money.
● Stop Accepting Cash Loans
As mentioned earlier, loan sharks have a habit of accruing large borrowings in exchange for a small borrowed sum. Moreover, they often charge high fees or interest rates. For example, according to a source, a woman borrowed £500 and ended up paying £88,000.
According to BBC News, a few loan sharks have charged interest rates at 719,000%. Moreover, loans are taken on a cash basis only have a verbal agreement, and the terms completely depend on the loan shark.
Therefore, borrowing a small sum from a friend, family member, or savings account would prove much more useful. Additionally, these three options would most probably not incur an interest rate.
Besides this, a loan shark may not provide information on the interest rate and constantly vary it based on personal choice. Taking a loan from such a lender can prove dangerous, as you might become a victim of violence or threats.
● Check FCA Financial Service Register
The Financial Conduct Authority (FCA) enlists registered lenders with a consumer credit license. Therefore, borrowers can check the financial details of the lenders before availing of loans. Moreover, FCA strictly advises against borrowing from an unlisted lender.
Besides this, FCA even enlists the activities in which a regulated lender is involved. Additionally, it offers protection mechanisms against such lenders and their activities. Moreover, FCA advises using the details mentioned in the register instead of other contact details.
Therefore, you can stay protected while borrowing money online or offline from a lender. Moreover, the borrower has the advantage of comparing the firm activities or permissions with the services. So, you always stay secure financially during dealings and get to avoid loan sharks.
● Consult and Report
Numerous online consultation websites offer advice before taking a loan. If you are new to money borrowing or have doubts about a lender, they can help clear them. Moreover, government and private consultants are familiar with the most common loan sharks.
At times, certain businesses have a valid consumer credit license. It might allow such organizations to conduct financial activities excluding lending. Therefore, the organization is potentially working as a loan shark and is breaking the law.
Besides this, many even offer a live chat facility to clear doubts regarding a potential loan shark. Then, after recognizing, you can either report it to the consultant or government agencies.
It might require approaching the police to avoid any danger, especially if you have already borrowed money. Instead, you should contact the FCA hotline or email to file a report. Moreover, you can even report to FCA anonymously.
By reporting or consulting, you can even find out that the lender is legitimate. Under such a circumstance, it is crucial to borrow only the required money through legal paperwork with a fixed interest rate.
● Seek Alternative Methods of Money Borrowing
The UK government offers benefits for food, emergency costs, etc. Therefore, you can visit the official website or book a consultation to take advice. Additionally, you can borrow money from credit unions.
Often, credit unions in the local area offer help in saving money and manageable credit products. They understand that most people that approach them have a poor credit rating and consider the details mentioned in the credit application.
The interest rates offered by credit unions for the loans are much lower than payday and doorstep lenders. Moreover, they are formed based on a commonality, i.e., a geographical area, employer, trade union, club, or church. Finally, they have a “not-for-profit” objective to help the community.
Similarly, bad credit loans with no guarantor can help to avoid a co-signer. It also helps to provide significant monetary aid at a fixed interest rate and repayment. Likewise, you can check for lending schemes with the current employer.
The best way to know about lending schemes with the employer is to research the website or reach out to HR. The latter can inform about schemes related to short-term assistance such as overtime or advance on wages.
You can even avail of utility assistance provided by the service providers. Many utility providers offer grants for people struggling to meet their electricity or gas arrears. Additionally, you could even become eligible for the Winter Fuel Payment scheme. The scheme allows covering energy price rises during the season.
Likewise, the government even offers benefits for women, unemployed, mothers, children, etc., that can help to reduce the financial burden.
What if You Become a Loan Shark Victim?
If you found out about a loan shark after borrowing money, it is crucial to report to the FCA. However, you won’t get implicated and would not be required to pay back the money. Moreover, the loan shark may even make claims of prosecution or sending to jail.
However, unauthorized lenders don’t have the legal right to accruing debt. Moreover, legally such lenders don’t have the right to take back a loan because it is illegal. So, loan sharks can succumb to harassment, intimidation, violence, and other methods of incurring the payment.
Under such a circumstance, it is crucial to contact the local Trading Standard Office. It will help to overcome the existing situation. Moreover, if a legal or illegal harasses you to claim back a debt, you can report to the same office and local police station.
Alternatively, the best practice would include making regular repayments to avoid alerting the loan shark about reporting to the authorities. However, it might encourage an increase in harassment or threats.
After taking action, you can stop making repayments. The action would involve submitting a formal witness statement with the Liaison Officer by your side. The statement would help to take necessary steps against the illegal lender or loan shark.
If you continue to receive threats after submitting the witness statement, you can call the emergency number or report to the local police. The authorities would help to get the illegal lender or loan shark off your back.
The authorities would also provide solutions for resolving money problems by getting in touch with credit unions, organizations, or advisory services. The government and private agencies would help to get life back on track.