Doorstep lenders, loan sharks and even ‘home credit providers’ as they are sometimes known, are infamous for their extortionate interest rates and exploitative selling tactics that can often leave vulnerable customers paying back large amounts, even for small loans.
What’s more, it unfortunately appears that the financial strains the COVID-19 pandemic has created has provided more opportunities for loan sharks, as there’s been a rise in the number of doorstep lenders in the local area.
So in the fight against this, this post has taken a look at how these lenders operate to help you spot a scammer and we’ve explained what alternatives there are out there for those in need of additional financial support.
Loan sharks are illegal lenders who often target low income and desperate families. The term ‘loan shark’ comes from the predatory and potentially violent nature of these lenders - they might seem friendly at first, but borrowing from them is never a good idea.
Using a loan shark can leave you in a spiral of serious debt, and you may even be harassed or threatened if you fail to repay your loan on time.
Here are a few telltale signs you are dealing with an aggressive doorstep lender/loan shark:
When asked about doorstep lenders, the Citizens Advice Bureau said that customers reported the use of “high-pressure sales tactics” often making it difficult for people to say no. These included:
Doorstep lenders have also been accused of conducting inadequate affordability checks - they make it easy to borrow money, but when it comes to paying back loans their repayment collectors can often be aggressive.
The good news is that there are some safe and legitimate alternatives out there to doorstep lenders:
Credit Unions, like ours, can be a good alternative source of credit for people with lower credit scores. We’re also a local organisation which offers affordable loans to our members. If you currently claim benefits, you may be eligible for a government Emergency Budgeting Loan. There are loans offered to struggling households so they can meet essential costs, and can be repaid through small deductions from your benefits.
Here are a few other approaches to take to stay safe, be on the lookout for loan sharks and manage your own money more effectively:
Be wary of loan sharks posing as legitimate lenders. You can check if a company is legitimate by searching the FCA’s register.If you have been issued a default notice, it is time to seek help with your debt.Loan sharks have been targeting vulnerable people during the COVID-19 pandemic - borrowing from them is never a good idea, even if you feel you have no other choice. If you are worried about a loan shark or need more information on reporting them you can check out the GOV.UK website.
If you are thinking about getting a loan or just want some additional information or advice on dealing with doorstep lenders, give us a call on 0113 242 3343, email email@example.com
Leeds City Credit Union is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority (FRN 213369).
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