Highlights
- 1.9 m adults in Great Britain have used unlicensed lenders or loan sharks in the past year.
- 38 per cent of borrowers earn above £3,200 monthly, while 65 per cent have children.
- Over a fifth (21 per cent) borrowed from friends or family, with some being charged interest.
Nearly two million adults in Great Britain have turned to unlicensed money lenders or loan sharks in the past 12 months, according to research commissioned by Fair4All Finance.
The IPSOS UK survey reveals that 4 per cent of the population have resorted to illegal lending, with more than half (51 per cent) doing so after being declined for legitimate credit. The cost of living crisis has left many households unable to absorb unexpected financial shocks without seeking alternative finance.
Contrary to expectations, the problem extends beyond the most vulnerable. Some 38 per cent of those using unlicensed lenders earn above £3,200 per month, well above the UK's median monthly take-home pay of £2,568. However, those on zero-hours contracts are five times more likely to use loan sharks than other workers.
Young people appear particularly affected, with 11 per cent of 18-24 year olds using unlicensed lenders, possibly due to limited credit histories. Many are turning closer to home, with 21 per cent borrowing from family or friends.
Nearly two-thirds (65 per cent) of borrowers have children. Carla McLoughlin, 42, told the BBC that borrowing small sums from her mum is crucial. The mother-of-three explains the money is needed "just to tide us over for a week or two until we get paid".
Strains in relationships
These informal arrangements often come at a cost beyond money. Of those borrowing from friends, 17 per cent said it weakened the relationship, while 9 per cent of family loans caused similar strain. Adding to concerns, 16 per cent of people borrowing from friends and 8 per cent from family were charged interest.
Kate Pender, chief executive of Fair4All Finance, noted that "It is deeply concerning that nearly two million people have turned to unlicensed money lenders or loan sharks in the past year. It sends a clear signal that too many people are being left without safe, affordable credit options when they need them most."
Moneyhelper, a government-backed website, warns borrowers to think carefully before approaching family or friends, as repayment difficulties could damage relationships.
