Households turning to illegal lenders to cover living costs

Many hard-pressed households are turning to loan sharks to cover day-to-day expenses.

According to Stop Loan Sharks, a quarter of people (23%) who borrowed from an illegal lender last year did so just to cover living costs, such as buying food.

And worryingly, many of these people were already financially stretched before borrowing money.

For example:

• half had household incomes under £20,000
• nine in 10 had no savings at all
• seven in 10 lived in rented accommodation

Many of these people also had caring responsibilities, with figures showing:

• 38% were parents
• 15% were lone parents
• 8% were carers for another adult

Why are people borrowing from loan sharks?

Covering day-to-day living costs was just one reason why so many people are turning to illegal lenders.

Other common reasons included:

• buying or repairing a car/vehicle
• rent arrears
• paying legal fees
• health costs
• helping family members

How much are people borrowing?

Struggling households borrowed an average of £3,000.

But the overall costs are bigger when you factor in repayments and interest.

As a result, many people found themselves struggling further.

In fact:

• 43% said loan repayments meant going without essentials
• one in four had used a foodbank
• one in four struggled to pay energy bills
• 22% were in rent arrears

So by turning to illegal lenders, struggling people have found themselves under even greater pressure, and often trapped in a cycle of debt.

What should you do if you’ve borrowed from a loan shark?

If you’ve turned to an illegal lender, then you haven’t broken the law. 

It’s illegal to lend money without a licence.

So it’s the loan shark who has broken the law, not you, and you won’t get in trouble with the police.

You don’t have to pay the money back as it was lent illegally. 

But if you’re worried about your safety, don’t just stop making payments. 

Get advice first.

There are specialist illegal money lending teams who can advise you if you’ve borrowed money from a loan shark.

You can report a loan shark online or you can call the illegal money lending team for your country:

• England - 0300 555 2222
• Wales - 0300 123 3311
• Scotland - 0141 2876 655

What alternatives to loan sharks are available?

If you feel like you have no option but to turn to a loan shark, then there are safer alternatives:

• Credit unions - they offer manageable credit and consider applications from people with poor credit scores.
• Employer lending schemes - your employer may be able to offer short-term help e.g. an advance on your wages. Talk to the HR department.
• Try our free benefits calculator - make sure you’re claiming all the financial support you’re entitled to.

If you’re struggling to cover all your living expenses, it may also be worth seeking debt advice.

We can help you with budgeting and let you know what debt solutions may be available and right for you.