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.
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