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[MSE Martin]

A plague of loansharks... what would YOU do?

It's no longer just the traditionally financially excluded. Recession means many are denied access to normal credit, boosting the business for 1,000% plus APR legal doorstep lending, and worse, illegal loan sharks who use intimidation and violence. Its worth EVERYONE being aware of the alternatives, even if you're no effected, so we all know enough to help friends/family desperate enough to resort to this:

• Social Security Social Fund Loans. Crisis Loans are for emergency or disasters e.g. after burglary or while awaiting benefits. Apply at the Job Centre, tho’ you needn’t be on benefits. Budgetting Loans are only for benefit-recipients, but allow a wider range of borrowing e.g. clothes, furnishings. Sadly the social fund's struggling with demand, but still try if in need; full info in the Debt Help guide.

• Credit Unions. These local based non-profit savings and loan co-operatives, can lend small or large amounts, and charge interest at fractions of those of doorstep lenders. See the full Credit Unions guide for more.

• Flog Stuff. Sell things rather than borrow, whether on eBay (see eBay Selling guide), car boot sales or to friends. Alternatively, while I'm no fan, use a pawnbrokers to sell to in the short term, with a right to buy it back, plus hideous interest. Unlike doorstep lenders, you’ll never be chased for the money.

• Debt Couselling. There are a host of wonderful free, non-profit debt counselling agencies out there like CCCS or Citizens Advice. Call them, for one-on-one help (more in the Problem Debts guide).

• Don’t borrow. Whatever the problem, borrowing from loan sharks is worse. They’ve used sexual violence, or even followed, threatened or intimidated children to enforce repayment. It’s never worth it.
  
  Plus, on Tue a new 'report sharks' hotline was launched (0300 555 2222), their loans aren't enforceable, so by reporting them you mightn't need to pay more (also see 0300 number blog).

Any idea? Have you been there? Please help.

If you’ve considered or experienced loan sharks or doorstep lending, or just have a good idea, please feedback or add your story to help others.

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[SAZ64]

Perhaps a social lending site like Zopa would work for people needing to borrow money? It may be an option if one meets their criteria.

[sacherlover]

Yes, I also thought about ZOPA.

Has MSE every reviewed it or done an article about it?

[MSE Martin]

Hi, thanks for the notes above

Zopa is included in the cheap loans guide when its rates are competitive, but but do remember it only lends to those with good to very good credit scores; and if people have those, then loan sharks isn't an issue anyway

Martin

[metaframe]

I recently received a phone call at home, the phone rang, i answered and at the other end was a recorded message advertising about borrowing money to get out of debt, basically it came over that whatever your credit rating you would qualify for borrowing money, you had to press a number on your phone to be put through to an operator. It is the first such phone call of this nature i have ever received and it would appear to be a new way of attracting more customers. I think that companies shouldn't be allowed to advertise this way, it is very tempting when within some ten seconds you have to make the decision to press a number to speak to an operator in order to apply for credit, an easy temptation for those already in debt. I would recommend that people register with the telephone preference centre who can put a stop to unwanted phone calls for companies advertising.

[beanielou]

Credit unions are the way to go.
They have really helped me to get my finances back looking a lot more healthy than they were.

I used the CU to get rid of all my expensive smaller debts & still save a small amount every month

[beanielou]

Meant to mention that also benevolent funds from previous or current employment can also help.

[RAS]

People often borrow from loan sharks when they are terrified into borrowing money to pay back other creditors or when they have been paying more then they can afford and have nothing for food.

We do not seem to get many folk on here who have used illegal loan sharks but a lot have taken out payday loans, log-book loans or provident loans with massive APRs. Getting them out of that hole is very hard.

Credit Unions can be a huge help; my local one offers "freedom" loans to help people who are not already savers get out of the grasp of legalised sharks. The Apr is about 26% which is better than some credit cards, although more then twice their normal rate.

[boudicca10]

I want to share my Provident experience! About 12 yrs ago I had a loan from them, money was very tight and I had no credit rating so I went for it. The interest was huge, but I needed the money. When I had paid off about half of the loan, I got another one, paid off the last one and spent the rest. Unfortunately, I got inot the habit of doing this for many years. My payments were never less than £15 per week. A man would call and take my money. £60 a month for ever and ever and ever.......eventually, I came to my senses and stopped the cycle. I paid off the last loan about 3 years ago and have steered clear ever since. I feel free now, I used to dread the man coming, he didn't care if I paid or not, and when things were really bad, a 'Manager' would call, talk to me about bailiffs and leave me to think about it. Needless to say., the following week I would cough up! Even now, when the doorbell rings, my first action is to freeze, for a moment, then I remember it's safe to answer the door and smile. I understand the urge to have some money from somewhere, doesn't matter where it comes from, you just need it, luckily I didn't get approached by illegal money lenders, otherwise I dread to think what would have happened. What I'm trying to say is this; Please don't be tempted, they tie you in, you will pay them thousands over time, I can't even begin to think about how much money I paid out to Provident. My life is better now, I have moved on, I am still poor, but the bills are paid and I am not tempted anymore. I spend what I have and nothing else. Easy huh? I don't think so, but I did it, and I'm chuffed with myself!
PLease don't go to loansharks, or Provident, they're no better really.

[RAS]

Thanks boudicca

Sad thing is that the provo is probably cheaper then the logbook or payday loan and we see them on every high street.

[ducky2004]

Other than those people who lend for love and don't mind if they don't get their money back, social lending "site" does not work really (I interpret the word social as lending to help people, rather than to do it for profit). All those Zopa lenders are there to make money...

The reason poorer credit people can't get credit is because they are less likely to pay it back. The net interest margin (i.e. profit after bad debt)of loan shark like Provident is probably just a few % (probably like £5 per £100 per year in good time, and obviously pretty -ve right now).. Bank's net interest margin is also about 1-2% or £2 per £100 per year. I have thought that most consumer lending profits comes from fees.

At Net interest margin of say 2%, if you diversify your loan and forgo all profit, you are saving people about 2% pa. Consider the headcache is gonna cost you if people don't pay (other than those Zopa vetted A++ borrowers), helping people to save £2 per £100 per year isn't exactly worth doing (tell them how to save money using MSE tricks may be of more help!)

According to http://www.thisismoney.co.uk/credit-...9&in_page_id=9

"Credit union normally charges no more than 1% per month"..errr... that is 12% pa on loan. Not exactly cheap.

The issue is that one's ability to repay frequently tied to one's job. Other than those in public services, this is pretty shaky right now. If one does not have a good history during good time, what is the chance that the loan commitment will be honoured during the worse recession ever ?

I suppose the rational thing to do (despite painful) is to say, well, my love, you can't have your christmas present as mummy/daddy has no money. These material things should never have been the measurement of a child's happiness to begin with anyway.

Originally Posted by SAZ64

Perhaps a social lending site like Zopa would work for people needing to borrow money? It may be an option if one meets their criteria.

[boudicca10]

The last loan I had of Provident was for £500, they tell you up front that the amount you have to pay back is £835 (It was on my last time with them) The reason you get stuck is because you are paying back so much each week that there is nothing left for basics, I don't mean expensive xmas presents either.
My son is 18 now and he has never been given expensive gifts from us, the money we borrowed was for every day use-not treats.
Please don't assume that because I was borrowing money it was because I wanted it for fun, really skint people need it for bills and food. Not expensive treats. You then borrow more to cover the amount you are missing each wek-a very viscous cycle to get stuck in.
You shouldn't judge.

[RAS]

Well said.

It only needs the benefits to be paid late, or miscalculated, or for three bills to have to be paid out of the same pay packet or someone to go on sick pay and the whole household income goes pear-shaped.

[beanielou]

Creit unions may well be 12% which may well not be cheep but its sure beats Provident or Greenwood & the like.
Never judge til you have walked in someone elses shoes.

[lennymfo]

Interesting subject. We need credit to function, when I had my LBM I swore that I never wanted credit again and the fact that my credit score being damaged did not bother me one iota. In fact whilst the DMP was indeed my saviour back then I was warned about the effects of having an adverse credit record and I am gonna pay for that for years. Actually as it turns out, I will need credit, the world needs to be able utilise credit to make it function. So how do I take advantage of competitive interest rates in the future rather than be at the mercy of the shadier lenders? I cant get a £50 overdraft with LLoyds TSB but I can get a CC from Vanquis at 40 odd % APR . Credit Card/Loan Companies need to wise up to the signs of people struggling with debt and to talk to each other and share information on customers; this will increase their faith in the credit lending schemes and boost confidence, getting people spending again. Was that off topic???

[Broken hearted]

There was a woman on TV the other night complaining about the doorstep loans she had taken out fine if she had no food or heat but no she needed the money for Christmas presents. I could have screamed if you don't need it don't borrow like Martin has said there can be some awful experiences.

[nqsenile]

Item on local news. Woman popped some jewelry. £100 loaned. Charge £8. for a month. Maximum loan period before jewelry sold 7 months. 8 x 7 = 56.
APR ?

[ANDENA]

I was guarantor for my daughter in law for a loan of £3,000 she could not pay so they took money out of my bank without telling me,she has since broke up with my son so he pays me the debt,Been very worried to have this round my neck i went to bank and got a loan to pay it off the APR was lower and i feel very relieved to get these sharks of my back i beg you dont have anything to do with them.i have put it on flm loans thread to warn people.

[Gorgeous George]

The most important thing to do is to plan. No need for a fancy spreadsheet - just write down all the bills that you need to pay. It can be quite depressing seeing it all add up but it is essential.

The old adage ' look after the pennies and the pounds will look after themselves' is as true today as ever. Once you know how much your bills are each month, you can work out how much, if anything, is left over. Save a little, spend a little. Try to avoid taking money from the savings pot and it will mount up over time. If there is no money left over, you need to reduce your bills and/or earn more.

I know it's easier to say than do but if you can't afford the stuff that you need, you certainly can't afford to be paying interest.

Fix the problem, not the symptom.

GG

[Horace]

I was made redundant in 2007 and didnt get much redundancy money at all and I have been managing to survive on JSA. Its not easy but I do what my mum started to do when she got married (and still does some 50 years late) and that is to keep a little book and write everything down - bills are first, then the shopping, fripperies come last. I am the same and I have managed to pay all my bills on time. I received a small inheritance and that was used to pay off all my credit cards not that I had much debt on them in the first place.

I think that the trouble with society today is that people want everything now instead of saving up for it. I have made do with buying second hand furniture and doing it up, I sell stuff at carboots etc. More recently, I bought a new vacuum cleaner and used money that I had saved up in my £2 jar to buy it. I only buy essentials and not fripperies and will even live on baked beans and toast for a while when times are lean. I make do and mend or do without altogether.

There was an article in the Birmingham papers over the weekend about loan sharks (they are often arrested and have their assets siezed up here) as well as women whose husbands have been made redundant and there is no money coming in and how they have turned to prostitution to pay the bills.

As my old grandma used to say "never a borrower or a lender be..." I think she was right.