Why Loan Sharks Attract Borrowers
Articles - Lifestyle
There's a problem with loan sharks in a number of countries across the world. The UK is one such country. In fact, in Britain an estimated 100,000 families borrowed from illegal lenders in the run up to Christmas alone.
by JamesRobinson


There's a problem with loan sharks in a number of countries across the world. The UK is one such country. In fact, in Britain an estimated 100,000 families borrowed from illegal lenders in the run up to Christmas alone.

Loan sharks do not operate within the law and this means that they have no care, nor do they adhere to, the regulations set out by the Office of Fair Trading. The OFT regulations include rules about interest rates and fees as well as the conduct the lenders must use when trying to reclaim monies from defaulting borrowers. Because the loan sharks do not adhere to these rules, they often charge extortionate rates and can become threatening in the event of missed repayments.

So with all these risks associated with illegal lenders, why do people still borrow from them? Well, the first thing to note is that the consumers using the illegal lenders tend to be those who cannot get loans from other sources, such as banks. These could be people who have declared bankruptcy or have particularly bad credit ratings. Essentially, these are people who feel that they are desperate and need a loan but have no place they can go to get one.

Loan sharks tend to operate in areas with a particularly low average income, where poverty is common. They are able to identify and prey on the desperate and, for those who have massive financial worries, the offer of a lump sum can be too tempting to turn down. A borrower can often be blinded by sheer desperation and fail to really take stock of the extortionate interest rates at which they will be required to pay back.

So there is clearly an issue to be dealt with. Perhaps education is key or tougher penalties for those who engage in illegal lending activity. High unemployment, made much worse by the recent recession, is a huge reason for people turning to lenders of this type. In light of the fact that unemployment is likely to remain high for some time, measures simply have to be put in place to prevent further issues.

DISCLAIMER: This article is provided as information only and is not to be taken as financial advice.

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