Debt Advice: Beware of loan sharks

A government think tank has come out with dire warnings regarding loan sharks. They believe that as a result of the recession tens of thousands of people will find themselves under the merciless grip of illegal lenders. These illegal lenders, or loan sharks lend money at astonishingly high interest levels, and are quite likely to revert to extremely unwholesome practices when faced with debtors who are unable or unwilling to repay them.

Often these loan sharks are found amongst districts within large cities which have been particularly badly affected by the recession and surging levels of unemployment. In particular the cities of Manchester, Gateshead and Lincoln were singled out. It is estimated that over 150,000 individuals currently rely on loan sharks in order to obtain credit. This number is increasing rapidly due to the continuing recession and credit crisis which is making it very difficult for many people to obtain credit from reputable lenders.

In the past it has been possible for people with poor credit ratings and who have been declined by the major credit organisations to obtain credit from sub-prime lenders. Sub-prime lenders charge higher interest rates than the major lenders for loans such as pay day loans which are short term advances, and log book loans which are loans secured on a car, however they have provided a valuable service and do play by the rules, in that they obey official guidelines regarding debt collection. The problem is that these sub-prime lenders are also pulling back from lending money to people in certain circumstances. This is forcing those who have been refused credit from legal organisations to seek credit from the illegal lenders, the numbers of which are on the increase.

For people who become ensnared in this illegal credit market there is often no escape. Debt is piles upon debt as interest is compounded at an exponential rate. It is strongly recommended that anyone who finds themselves in problems with debt should seek debt advice from a reputable organisation without delay.
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