Debt Trap News: Brits fall foul of loan sharks

15/01/2010

A new report has outlined the huge debt risk posed by Britain's exposure to loan sharks.

The Real Cost of Christmas report was published by Circle Anglia and authored by thinktank the Financial Inclusion Centre. According to the study, one hundred thousand people in the UK borrowed money from illegal lenders this Christmas.

The total value of the illegal loans was an estimated £29 million.
However, the final cost of repaying the debt will be much higher, at £82 million – showing the huge cost of using such lenders.

To highlight this, the report found that the average interest rate charged on illegal borrowing over the festive period was equivalent to 825 per cent APR.

Kevin Still, director of EuroDebt, said: "Lending restrictions on the high street have played right into the hands of home credit providers, ‘pay day’ loan companies, pawnbrokers and illegal loan sharks."

EuroDebt sees many people start a Debt Management Plan'>Debt Management Plan, only after having used very expensive credit that has created a debt spiral.

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