Report sees 'return of the loan sharks'

26/05/2009

Many debtors are being forced to use unscrupulous "loan sharks" as the recession deepens and budgets become stretched.

According to the Local Government Network, a total of 35,000 people could use these lenders after finding it hard to secure credit on the high street.

Around 165,000 are thought to have already employed their services.
One of the main features of the credit crunch is that lending conditions from mainstream banks and building societies have become tighter.

This has opened the door to the illegal "sharks" - who offer loans which tend to be at much higher rates and put the borrower at higher risk of falling into a debt spiral.

Chris Leslie at the Local Government Network said: "There is evidence to suggest that the pernicious trend of illegal unsecured lending at extremely high rates of interest, or loan sharking, is making a comeback."

Kevin Still at EuroDebt added: "Using home credit providers, pawnbrokers, pay day loans and other very high interest rate credit should be considered very carefully and shouldn't be used as an act of desperation.

"'Debt Spiral' is the most common reason given by clients joining one of our Debt Management Plans. In many instances getting professional advice before using these types of services would have been in their best interests. Borrowing your way out of debt is seldom the right solution."

Tags; Housing Debt and Bills, Credit Card Lifestyle,

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