When you should be wary of accepting money off a ‘mate’

We all like to think we know who our real mates are. The ones who you’ve known for years. The ones who are there when things get tough. But what about the ones who offer you money when you're in a tight spot?

Sometimes, that ‘helpful’ mate isn’t really being helpful at all.

They’re the opposite, in fact.

With the rising cost of living, more people are turning to friends, family or even colleagues to borrow money. A survey of 2,180 UK adults, carried out by the Money and Pensions Service, showed that in the three months to January 2023, 23% relied on credit or money from family and friends to buy food. The same number did so for electricity and gas.

Borrowing from ‘friends’ can feel like the fastest and easiest way to get by. There are no forms to fill in, no scary interest rates… or so it seems.

But borrowing money, especially informally, can come with serious risks.

During Stop Loan Sharks Week, we’re raising awareness about how illegal lenders, often posing as friends, can take advantage when you're most vulnerable.

Loan sharks don’t always look like sharks

They might seem like a mate. They might be introduced to you by someone you know and trust. They might say things like “I’m just helping you out” or “don’t worry, pay me back when you can”.

But once you’ve taken the money, things can change and fast. Suddenly the repayments go up, threats begin and you’re trapped in a cycle of fear and debt.

According to the Centre for Social Justice:

• almost two thirds (64%) of loan shark victims in England were introduced to the lender by friends or family
• over half (56%) had considered the loan shark a friend before borrowing from them

Karen’s story

When Karen* moved into an unfurnished home after living in a shelter, she was already drowning in debt. She needed furniture quickly.

A friend of a friend offered her a £1,000 cash loan. There were no forms, no questions, no affordability checks. Just a promise to pay back £2,500 in six months.

Karen’s friend even collected the cash on the lender’s behalf, so Karen had no idea she had entered a risky agreement.

But it wasn’t long before the repayments shot up. Karen was soon paying £600 a month and paying back thousands more than the £2,500 she had agreed to.

When Karen reached out to us for support, we recommended she report the illegal money lending. She followed through with this advice.

While reporting a loan shark can be daunting, it can help prevent others from experiencing similar suffering and make communities safer.

Karen has since vowed never to turn to a loan shark again and warns others to avoid illegal lenders at all costs.

How to spot a loan shark in disguise

You have to be authorised by the Financial Conduct Authority (FCA) to lend money legally. A loan shark is an unlicensed money lender who hasn’t been authorised by the FCA.

Find out how to check if a lender is authorised.

Here are the red flags to watch for:

• they seem friendly, until you owe them money

• they claim to be mates with people you know

• there’s no paperwork or agreement
• they take your passport, bank card or valuables as security
• they take your belongings if you miss a payment
• the debt never seems to go down
• they intimidate or threaten you

Even if, like in Karen’s case, they are introduced by a legitimate friend, always be wary, do your homework and trust your instincts.

What you can do

If you've borrowed from someone who isn't authorised by the FCA, you haven’t broken the law, they have.

Even if you borrowed from a friend or family member, which isn’t illegal, they are not allowed to harass, threaten or intimidate you.

If anything feels off, don’t wait, report it.

For more information about red flags to look out for when borrowing money, where to get advice on illegal money lenders, alternatives to loan sharks and how to report them, check out our loan shark guide.

Remember, a real mate won’t try to intimidate you.

*Name changed to protect our customer’s privacy.