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Monthly Archive for June, 2009

Page 2 of 2

Doorstep Lending – An alternative to loan sharking

Published on June 5, 2009 in Personal Finance. 1 Comment

Doorstep lending is a popular financial solution for people who are in need of instant and small loans. This lending service is primarily targeted towards people from lower income group and bad credit history.

Doorstep lending was first introduced in the nineties but it flourished after the recent economic recession. With so many people becoming jobless it was somehow apparent that they would turn towards alternative financial solutions like doorstep lending.

Doorstep lending is generally lent out for 28 weeks and the repayment is done on a weekly basis.  Nevertheless, you can always obtain a longer or shorter tenure according to your affordability. The collection agent will call at the borrowers place to collect money. The average rate of interest is 25% on the priciple.

However the National Consumer Council (NCC) (now called Consumer Focus) has lodged complaints to the Competition Commission and OFT against the doorstep lending. They said that although the borrowers are quite content with the doorstep lenders, but they are paying a very high interest rate. This has happened due to lack of competition in the home credit market. The Competition Commission has also noticed that the borrowers do not care to look around for better deals while shopping from doorstep lenders although there has been a significant improvement in other sectors of credit market.

To solve this problem the Competition Commission has launched a new website lenderscompared.org.uk which will help you to get the best rates for doorstep lending. This website is operated by different organizations such as Association of British Credit Unions, National Consumer Council and Consumer Credit Association.

At present there are 500 firms that provide doorstep lending facility among which three companies dominate the business. Provident Financial in Bradford, S&U and Cattles of Hull are the ones who charge the highest rates in the market. Although Provident financial is considered the giant in this industry, S&U controls almost 50% of the doorstep lending market.

If you are in need of some instant cash, doorstep lending can be a better option than loan sharking or other illegal lending process. However you must look out for the best deal. Make sure to repay every week failing which you may be charged with higher than what you have primarily agreed upon.

4 Alternatives Loan Sources to Avoid Loan Sharks

Published on June 4, 2009 in Personal Finance. 3 Comments

Why more people are turning to loan sharks?

The trend of loan sharking began in the early nineties. But due to the current economic condition, it has become difficult for many people to obtain loans from conventional sources. There has been a significant increase in the number of cases of loan arrears too. These borrowers are considered high risk and thus they either get a loan with very high rate of interest or don’t get a loan at all.

The current market trend is pointing towards more people succumbing to the plots of these loan sharks. And it is not just about the traditionally identified low income group. A new group of jobless people is emerging rapidly who are badly in need of alternative and easy loans. Both these groups are easy victims of loan sharks.

Alternatives that can be used to avoid loan sharks

Have you already been refused a loan by the top tier credit companies? If yes, there is nothing to despair and no need to go to loan sharks. Here are some alternatives:

Sub prime lending

Sub prime lending is a second chance lending that is applicable to borrowers who do not qualify for the prime or generic standards of loan. The prime standards depend on factors like the borrower’s credibility, financial status, current debt and credit rating.

Sub prime lending is typically done in secondary market where these loans are treated as high risk loans for both the creditor and the debtor. These loans come with a very high rate of interest or up-front fees. Sub prime lending is also known as C-paper or non prime lending. This is a legal lending procedure that involves regulated process with relevant paper work. Though they charge very high interest rate, it is still a better option than dealing with loan sharks.

Credit Unions

Credit unions are co-operatives created and owned by a group of people. They use the method of “pool savings” so that they can give out loans to the members as and when required. Every credit union follows some specific rules about who can join that group. Generally members of the same village or community join the group.

Credit Unions are a good place for saving and borrowing money. They also provide advice on budgeting and other basic financial services. The credit unions offer small loans to its members at a very reasonable rate and easy terms.

For more information please read this detailed article on credit Unions.

Council banks/Municipal Banks

Council banks and municipal banks are run by the government. These banks are specially developed to provide financial services to the low income groups in the society. These banks lend money at a cheap rate to people who are unable to qualify for a general loan.

Doorstep lending

Doorstep lending is another alternative to avoid loan sharks. It is given out to people with poor credit rating and very low income. They offer small amount of loan starting from as little as £100. The doorstep lenders charge a high rate of interest that can even go up to 150%. The borrower has to repay every week to an agent who calls at their home.

Doorstep lending is legally obliged and recently the Competition Commission has launched a website lenderscompared.org.uk where a borrower can check out the different deals offered by various doorstep lenders.  For more information please read this detailed article on Doorstep Lending.


Loan Sharks are smelling blood

Published on June 3, 2009 in Personal Finance. 0 Comments

Almost 200,000 Britons are already trapped by the loan sharks. Further more, an estimated number of 35,000 people can fall prey to the loan sharks or illegal lenders this year as a result of the turbulent economic situation. The most affected segment of this recession is the low or no income group.

The number of people borrowing from the loan sharks has already reached an alarming level. To fight this situation the New Local Government Network or the NLGN has decided to pump in more funds into the Credit Unions and set up Council banks. This would facilitate refused borrowers with loans.

Who can be the easiest prey for the loan sharks?

Loan sharks prey on people who are financially helpless. Illegal lending is prevalent in places where standard or sub prime lending is not available. Situation can be worse for people who do not have the facility or eligibility to obtain loans from credit unions or home credit companies.

A large number of people living in the home credit excluded areas become an easy victim to the loan sharks. These people generally have very bad or no credit history at all. They also have a very low income with no assets and succumb to the easy and instant cash that the loan sharks offer.

Another financially vulnerable section includes people who have a chaotic lifestyle or suffering from mental illness or drug and alcohol addict. They are easy targets for loan sharks. Most of these borrowers have used home credit lenders in the past. However they ultimately had to turn to loan sharks since they defaulted in paying the home credit companies and got turned down by all other regulated sectors.

What are Local Governments doing to fight against loan sharks?

  1. Pointing out illegal money lenders and analysing local requirements
  2. Developing and promoting Public Awareness through financial literacy
  3. Taking enforcement actions against the loan sharks
  4. Actively developing and supporting credit unions and sub prime lending
  5. Direct intervention in proactive Council banking and availability of credits
  6. Identifying the financial exclusions
  7. Asking the councils to convince banks to lend affordable loans to the locals

What we can do against loan sharks?

You will be amazed to find out that a large section of people are quite unaware of the dire consequences of falling into the trap loan sharks? Some of them even consider loan sharks to be angels. They do not know what to do when they are brutally abused by loan sharks. They also do not know that loan sharking is illegal. They do not know about the government initiatives. And perhaps they are not reading this article now.

We must take the initiative. The best thing we can do is to educate them – tell them why they should stay away from the loan sharks. And more importantly, help them to find out alternatives. If you can stop even one person from being trapped by loan sharks, you should be proud of being a worthy human being. Here you are not saving a person – perhaps you are saving a family.

If you come across a loan shark report it straight to “Stop Loan Sharks” in any of the following methods:

  1. Website: http://www.direct.gov.uk/stoploansharks
  2. 24×7 helpline: 0300 555 2222
  3. Email: reportaloanshark@stoploansharks.gov.uk
  4. Text/SMS to 60003

Loan Sharks – Stay away from them?

Published on June 1, 2009 in Personal Finance. 0 Comments

Do you know that almost 7 million people in Britain are forced to obtain loans from loan sharks? Don’t get yourself counted in this number. Just stay away from loan sharks.

Who are loan sharks?

They are the easiest available lenders around when all doors are closed for a decent loan package from a recognised organization. They are not licensed under the Consumer Credit Act and they lend money illegally at an astronomical interest rate.

They generally prey on people who are badly in need of fast cash and have a bad credit rating, low income or have been refused loans from banks or other registered financial institutions. They simply take advantage of the poor financial conditions.

Since they are not licensed by government, they hardly care to follow any lending terms and conditions. Thus the borrowers remain unprotected by any legal loan terms.

Obtaining a loan from a loan shark may result into severe consequences in future. They are worse than the debt collectors. They will practically rob you off. They use violence and severe abusive methods to collect money from the debtors. Most of them are satisfied with the interest on the amount – the debtor may be paying around 125% per month as interest.

The Government of United Kingdom has taken several measures to stop these illegal lenders. They have also been arrested and prosecuted for assaulting customers, drug offences, extortion, possession of firearms and other organised crimes.

If you have already taken up a loan from these unregistered lenders and are facing threats from them, you need to contact the nearest Trading Standard’s office. The trading standard office helps you in dealing with these loan sharks.

You can also get in touch with the authorities at http://www.direct.gov.uk/stoploansharks

You can call the helpline 0300 555 2222

Or email them at reportaloanshark@stoploansharks.gov.uk

Or send them details by text/sms to 60003.

They have already prosecuted 60 illegal lenders, and have provided complete support to more than 7,000 victims.

More importantly, you have a bigger role to play – spread the information among your friends, colleagues, family members etc. Tell them to stay away from these loan sharks. Need more reasons? Wait for the next article in the same topic.

Stay Away From Loan Sharks
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