Financial charity warns consumers to stay away from loan sharks

Although the government is preparing to crackdown on illegal loan sharks that pray on people that are in severe financial difficulties, it seems that many people are still turning to these lenders through sheer desperation.

Loan sharks offer those looking to raise finances money for a specified period of time, but charge extortionate interest on the borrowing, and in the event that payments are missed or late have been known to use threats and even get violent. Because these loan sharks work on an illegal basis there is no regulation in place to ensure that they act fairly.

Now, the financial charity and education group, Credit Action, has warned those with poor credit and financial issues to stay away from these loan sharks under all circumstances, and look at another solution instead. Loan sharks are typically used by those with a very bad credit rating or history, as consumers in this group find it difficult if not impossible to get credit from any mainstream lender. Illegal lenders target such groups in the knowledge that they can get business through the sheer desperation of those that cannot get credit elsewhere.

However, Credit Action has identified a number of solutions that may be available for those looking for finance who have bad credit and cannot borrow from banks and mainstream lenders. The first solution is for those with a property in their name. Secure loan borrowing is far more accessible to those with poor credit than unsecured borrowing, and if you have poor credit and cannot get an unsecured loan you may find that you can take out a loan from a reputable lender by securing it against your home.

Doorstep lenders and payday loan companies could also provide a short term solution for those looking for finance on a short term basis. Although the APR is very high, the loans are short term and therefore the fee for borrowing may be viable. These companies do not carry out credit checks, but you must meet certain criteria.

Socials Fund loans are emergency loans granted by the government, and this is another possible solution, although again there is a strict criteria that must be met in order to be eligible. And finally, some people may have access to credit unions, which are community run and are able to award small loans to members based on eligibility.

Tom Smith
06.03.07

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