Understanding the dangers of illegal lending: avoiding loan sharks



This month marked the 20th anniversary of Stop Loan Shark Week, aimed at highlighting the increasingly concerning impact loan sharks have upon the UK public. For those unfamiliar with this term, Loan sharks, also known as illegal lenders, prey on individuals who are unable to secure loans through legal channels. Despite the risks, research from Fair4All Finance (2023) indicates that a staggering 3 million people have borrowed from unlicensed or unauthorised money lenders in the past three years.



Why you should avoid loan sharks
Loan sharks might appear friendly initially, especially if you keep up with repayments. However, borrowing from them can quickly become costly and risky. Here are key reasons to avoid them:


  • High interest rates. You may end up paying far more in interest than you would with a legal, regulated lender.
  • Potential for harassment and threats. Falling behind on payments can lead to harassment or threats.
  • Debt spiral. You may be pressured into taking more loans to repay existing ones, leading to a cycle of debt that’s hard to escape.

Identifying a loan shark
To protect yourself and others around you, it’s important to recognise some of the main signs that you may be about to borrow from a loan shark. Please note this is only a few of the many warning signs to look out for.


  • No paperwork. Legitimate lenders provide documentation. Loan sharks avoid this to maintain control.
  • Cash transactions. While some now use bank transfers, most prefer cash to keep transactions off the record.
  • Lack of transparency. They often refuse to give clear details about the loan, such as interest rates and repayment schedules.
  • Personal possessions as Security. Some take passports, bank cards, or other possessions as collateral.
  • Increasing debt. Loan sharks might increase your debt or add charges unexpectedly, even if you’re making regular payments.
  • Threats of violence. Intimidation and threats are common tactics to ensure repayment.
  • Multiple borrowers. If someone you know is lending to multiple people, they might be a loan shark.

Alternatives to loan sharks
If you have a low income, poor credit, or need a small amount of money for a short period, consider regulated lenders. They can offer safer, legal options, with some lenders such as ourselves able to base loan applications on your affordability to repay  and not just your credit score alone.


While there are plenty of regulated options to choose from, Credit Unions can be a great starting point. Co-operatively owned, they have your best interests at heart and can direct you to the correct place to get advice and support.


Other alternatives may include looking into a credit cards, an approved overdraft or seeking financial support that may be available to you depending on your personal and financial circumstances.

Reporting loan sharks
If you suspect someone is a loan shark, you can report them anonymously:


How the Stop Loan Shark team are supporting the UK Police
The England Illegal Money Lending Team, known as “Stop Loan Sharks”, is the only organisation in the UK with the authority to investigate and prosecute illegal money lenders. Collaborating with all police departments across England, they share information about illegal lenders and relevant legislation, raising awareness to help enhance community safety.


The Stop Loan Shark’s team consists of specialist investigators and LIAISE officers who support victims of loan sharks while working to bring offenders to justice. They have comprehensive Trading Standards powers, including the authority to enter and inspect suspected premises.


Their work helps gather information, corroborate intelligence, coordinate operations and raids, all while having the power to seize documents, weapons, books, mobile phones, computers, and other evidence needed in court. The team includes seconded police officers trained under the Police and Criminal Evidence Act (PACE) who can seize cash or drugs and interview suspects at local police stations.


How can they help your force?
The StopLoanShark team works tirelessly to support UK Police in combating illegal lending by providing them with essential knowledge and assistance. Below are some of the key services their team can offer your Police force free of charge:


  • Officer training. Sessions to raise awareness about illegal lenders and legislation.
  • Victim support. One-on-one support for borrowers.
  • Publicity material. Educational resources and campaign materials.
  • Community projects. Development of bespoke community safety projects and campaigns.
For more information on how the England Illegal Money Lending Team can support your force, please contact Catherine Wohlers at Catherine.wohlers@birmingham.gov.uk.

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Written by,
Benjamin Kirkman
Marketing Officer