How to spot and avoid loan sharks

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How to identify a loan shark

Loans sharks are just as scary and sinister as they sound. Preying on vulnerable people and charging extremely high interest rates, they should be avoided at all costs and reported immediately. 


If you’re looking to borrow money and aren’t sure how to spot a loan shark, we’re here to help! We’ve put together this post to explain all the red flags that signal you could be dealing with a loan shark and what to do if one tries to bite. 


Remember, if you’re a public sector worker who’s looking for an affordable loan, you can borrow from us. So get in touch now or keep reading to learn about safe alternatives to loan sharks. 

What are loan sharks?

Loan sharks are illegal lenders who offer loans with extremely high interest rates, usually to people who are desperate or facing financial hardship. They generally have very harsh collection terms. 


Predatory lending, the term used to describe the unethical practice of giving loans with very high interest rates, such as payday loans, is also sometimes considered loan sharking. 

Why are they bad?

Loan sharks are very bad news and whatever situation you’re in, borrowing from one is always a bad idea. 


There are countless reasons why loan sharks are bad, with the first being unbelievably high interest rates. Taking out one loan from a shark often spirals into an unmanageable situation because their high interest rates force victims to take out further loans to repay it, creating an ever-growing amount of debt that’s impossible to pay back. In addition, they may increase interest randomly and without warning, meaning that your debt to a loan shark could double or triple at a moment’s notice.


However, they don’t just cause further financial worries, they’re also very dangerous. It’s not uncommon for loan sharks to hassle or harass their victims when it’s time to collect their money. They often bombard people with phone calls or arrive unannounced at homes or workplaces. They can get aggressive and threaten victims with violence - sometimes even resorting to intimidation or attack - and have been known to use blackmail to get their money.


Using threats, physical violence, or blackmail is against the law so if a loan shark is using these tactics on you, you should report them to the police. No matter what the loan shark tells you, getting the police involved won’t result in you being prosecuted. 

How do loan sharks work?

Loan sharks usually work within a personal network, unregistered businesses, or are part of organised crime groups and their money usually comes from unidentified sources.

How do I spot a loan shark?

Luckily, spotting a loan shark isn’t too hard because there are several tell-tale signs to look out for. For example, there’s no paperwork (like credit agreements) involved when you’re borrowing from a loan shark and they won’t provide key information (like interest rates). Also, loan sharks often take personal items as security, so if a lender is asking for something important, like a passport or a driving license, don’t give it to them. 

How to check a lenders credibility

Before taking out a loan with a lender, it’s vital to check their credibility. Fortunately, the Financial Conduct Authority (FCA) makes doing this very straightforward. They have a list of all authorised lenders, so make sure your lender is on there before borrowing any money.


If a lender isn’t on the list, they have no legal right to recover the debt so if you’ve borrowed from a loan shark, you’re under no legal obligation to pay it back.

Reporting a loan shark

Reporting a loan shark is really simple, but who you should contact when dealing with one will depend on where you live within the UK.


If you’re in England, you can report a loan shark online or contact the Illegal Money Lending Unit by telephoning them on 0300 555 2222, emailing them, or texting a report to 07860 022 116


If you’re in Wales, you’ll need to contact Wales Illegal Money Lending Unit by telephoning them on 0300 123 3311, emailing them at, or texting a report to 07772 608 931.


If you’re in Scotland, you can report a loan shark online or telephone Trading Standards Scotland at 0800 074 0878.

If you’re in Northern Ireland, you can call the Trading Standards Consumer line at 0300 123 6262. 


If you’re nervous about reporting a loan shark, don’t be. It’s very important to remember that whilst being a loan shark is illegal, borrowing from one isn’t, so you won’t get into any trouble by reporting them. If you’re being threatened by a loan shark and are scared to take action, you can report them anonymously, which could give you greater peace of mind. 

Where else can I get a loan?

If you need to borrow money, there are plenty of safe alternatives to loan sharks, even if your income is low and your credit rating is poor. 

Commonly, people use high-street banks or building societies, which usually allow you to borrow as much as they believe you’ll be able to pay back. To give yourself the best chance of securing a loan this way, work out how much you can reasonably borrow and a sensible repayment plan. 


If you’re facing some financial difficulties, a credit union may also be a good option. Credit unions are nonprofit entities that aim to serve their members rather than make a profit, meaning that their savings rates are higher than usual and their loan rates are lower than usual. However, you have to join a credit union to have access to this, which is only possible if you meet its membership criteria. 


Other options include getting a loan from a supermarket or high-street store like Marks and Spencer or borrowing from the government. The government offers a number of loans for people in different circumstances, such as a budgeting loan for those who have been on benefits for at least six months and a start up loan to help people start or grow a business. 

Salad Money

If you’re employed, you could get a loan with Salad Money. We offer affordable loans of up to £1000 in an effort to end the toxic loan companies that rip off hard-working people. As well as being an ethical lender, we’re overseen by an independent body, making us completely reliable and trustworthy. You can find out more about our loans and apply for one here.


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