With the cost of living continuing to increase, many people are finding themselves struggling financially. In these difficult times, many may consider short-term fixes to get them through until the next payday. This includes things such as taking out a loan from a loan shark or credit companies with extortionate interest rates. However, one decision made in desperation can lead to a lifetime of financial problems and possibly worse.
How to spot a loan shark
As the name suggests, loan sharks are predatory, but you might not realise someone is a loan shark at first as they often try to win people’s trust and pretend like they are acting in your best interests by offering you money. However, the situation can quickly turn into being harassed for repayment and you will face spiralling high-interest rates.
Unlike standard lenders who must be registered with the FCA, loan sharks are illegal moneylenders, and they will not have paperwork or proof of how much you pay off. Many loan sharks will become nasty if they do not receive the repayments and you could be threatened with violence. You have no protection regarding the loan, what you repay is your word against theirs and they are not renowned for being honest as they are usually involved in other criminal activity, which your repayments will be funding.
You could end up being in debt to a loan shark for many years and long after you have paid the amount back that you borrowed. Interest rates can be even higher than 100% and, in some extraordinary cases, criminals charging 100,000% have been identified. With those rates, many people will find it impossible to ever pay the loan off, so they live with this situation for the rest of their life.
How to avoid loan sharks
Be very wary of any people who approach you with financial offers and only ever consider a loan from an organisation that is registered with the FCA, so that you have some form of protection.
If you are in a situation where you need money fast, look at other options such as taking a loan out from a bank or a credit union. If you have poor credit history, a bank may refuse your loan application, but a credit union could still approve a loan based on your existing affordability.
Why choose a credit union?
As well as having less rigorous credit checks than banks, credit unions provide a more personalised service, flexible repayment options and they can give you financial advice to help your situation and prevent you from resorting to loan sharks and the risks that come with that.
The Central Liverpool Credit Union is available to people living and working in the Liverpool City Region and you can visit the office or go to a stop on the mobile office route. We can quickly process your application to see whether you are eligible for a loan with no hidden costs and no extortionate interest rates.