Loan Sharking Increasing As Consumers Find It Hard To Get Credit

Wednesday, 20. January 2010

A few years ago I was a consultant to Yes Car Credit, a company that I hugely respected because, in many ways, they got it right! However, becoming the UK’s largest seller of used cars in about 4 years carried with it a number of problems that the UK press, as always, was eager to pounce upon. The company was selling nearly 50,000 cars per annum at the point of its demise and I would admit that the combination of sub prime finance, used cars and salesmen on mainly commission income was a sometimes disastrous combination and caused a few problems but YCC actually kept the sub prime market honest, or as honest as it would ever be. Many people, struggling to arrange finance on a car that was essential for work or family, were able to arrange finance and keep their lives together on an APR of 19%. Previously these people would have struggled to arrange finance at all and if they did they would have been ripped off by a local dealer on an over priced car who arranged finance through Welcome Finance at 50%+ APR. These days there are very few sub prime car finance providers and those that advertise that they are sub prime are actually, in the main, near prime, providing finance at high rates to those who have just slipped below prime rates. As a result of this we hear that illegal loan sharks are on the increase for loans on all sorts of things including cars. The increase in loan sharking was highlighted in a report entitled ‘The Real Cost Of Christmas’ produced by The Financial Inclusion Centre which suggested that borrowers will have £82 million to repay this year with £29 million borrowed over Christmas. They have estimated that borrowers borrowed on average £300 and will repay interest rates between 800% and 1,500%. This means that the average loan of £300 will have a total owed of £800. With less regulated sub prime finance available loan sharks have increased by 22% over the last 3 years. Whilst the Government has set up specialist Trading Standards teams to tackle the problem loan sharking is set to rise further as more people fall out of the prime lending qualification criteria and desperation kicks in. Individuals can do more themselves to protect their credit in order to ensure that they achieve prime rates. There is a lot of information to help those in trouble and free debt advisors to assist but a simple check on your credit file could throw up anomalies or errors that could be resolved before credit is applied for. I will be providing more information in due course but whatever the circumstances no one should take out a loan with these loan sharks. It’s not a source of lending its daylight robbery. If you know of anyone in this situation point them in the direction of their nearest Credit Union. By Graham Hill