Survey reveals a worrying trend now that payday lenders have been regulated
Guarantor Loan specialist LendFair commissioned a survey which reveals that over 1.3 million adults in the UK will use or be tempted to use a loan shark in the next 10 months and this figure is expected to rise now that new regulations are in place for pay day lending. The survey was designed to highlight borrowing habits across the UK but unearthed a number of unexpected facts that include the following:
- People are still willing to borrow up to £5,000 from an unregulated lender (loan shark).
- Over 35’s are more likely to borrow from a loan shark than under 25’s.
- 80% of people would consider borrowing from either family or friends.
- Although 17% said they would borrow less under a Labour Government, 76% would not alter their plans for borrowing if Labour got in at the next election.
- Short-term borrowing remains popular with 45% planning to pay off borrowing within a month.
Loan sharking is well known for its cycle of fear, intimidation and violence but the true scale will never really be known. Recent progress by the Illegal Money Lending Team (IMLT) has meant that arrests totaled 100 last year with 50 prosecutions. There’s even a reported 60 people currently under witness protection in England alone.
In many cases there is no record of transaction between a loan shark and its debtor and borrowers are punished for missed payments with arbitrary increases on the amount owed. In one case that emerged recently a man had taken out a loan for £250 yet was forced to repay a total of £90,000 over the next 17 years before contacting the IMLT.
Commenting on the news, LendFair Director, Colin Babb said: “Although we applaud the good intention behind regulating the payday lending market, it looks like it will create another, much deeper problem. The new capping system will result in fewer payday lenders with stricter criteria and it’s naive to think that people will suddenly stop borrowing which undoubtedly will drive them in to the arms of loan sharks.The alternative for many with poor or non-existent credit histories may be a lower risk, lower cost Guarantor loan, where a friend or relative can help the borrower avoid using a loan shark.”
Industry estimations suggest that there are up to 10,000 loan sharks currently operating in the UK and the IMLT believes that they are responsible for a ‘ghost economy’ of anywhere up to £700 million.
LendFair gives access to borrowing even if customers have a poor or non-existent credit rating so long as they have someone with a decent credit history who’s prepared to stand as a guarantor. The big difference is that LendFair, just like the high street banks offer what are called ‘term loans’ allow regular monthly fixed and affordable payments rather than the short term ‘rolling traps’ offered by the payday lenders, or worse, the loan sharks. In the survey 80% of respondents said they would consider borrowing from friends or family and a Guarantor loan may be the perfect solution.
LendFair pride themselves on working with customers to offer the best deal based on affordability in advance of any borrowing arrangement. Although the process can be relatively quick it is also thorough and all our account managers work with customers to find the most suitable deal for everyone, not just the business.
The survey was completed by online survey company Toluna between Friday 27th February and Monday 2nd March 2015. The survey sample was 500.