The true cost of loan sharks

Over 100,000 UK families turned to loan sharks over the festive period to ensure they had enough cash to cover the costs of presents and all the trimmings, a new report claims.

A research paper commissioned by leading affordable housing provider Circle Anglia and authored by not-for-profit think tank the Financial Inclusion Centre, estimates the scale of loan shark activity over Christmas 2009. It found that almost £30m in illegal loans were taken out last month to cover costs, which by the time they have been paid back will have almost tripled to £82m.

Over the last three years the estimated use of loan shark activity has increased from 165,000 to over 200,000 households per annum – a 22 per cent. As the recession continues to bite, more families are being cut off from access to mainstream financial services and the loan sharks have moved in. But this quick fix solution comes with many dangers, and is far from brief – borrowers are stuck with an average interest rate of the equivalent of an APR worth 825%, and take over a year to pay loans back.

Experts have warned Britons not to be fooled or tricked into borrowing from loan sharks, as much more is at stake than just higher repayments. If you find yourself strapped for cash or struggling with unmanageable debt, there is help at hand.

In the following video, Leanne Baxter, Head of Sustainable Communities at Circle Anglia gives some important advice on how to get out from under your debt – and stay that way.

For more information visit circleanglia.org.