Is Your Loan Illegal?
There are many credit options available to potential borrowers. Loans, credit cards, store cards and more are all available to borrowers with the right credit score.
But what if you don't have the right credit score? If your credit profile features missed or late payments (defaults or arrears) and County Court Judgements (CCJs) you may find it difficult to get a loan. An organisation that promises a loan, whatever your circumstances, might seem like the answer to financial worries. Be careful, though, you could become the victim of an illegal lender or loan shark. Here are some signs to look out for.
Flashing The Cash
Most consumer credit is regulated, with application forms and approval processes. If someone is prepared to bypass these processes, then that might be a sign of illegality. Watch out for people who turn up at your home, offer you an on the spot loan, and pull out large sums of cash. This is not how reputable lenders behave.
Illegal Loan Interest
Pay attention to the interest being charged. Most illegal lenders will add the interest on to the loan amount immediately. This could double or treble the amount being borrowed and there will be no agreement to regulate the loan. This is an expensive way of borrowing and if payments are not kept up, the amount owed could get out of control. In one case, someone who had borrowed £5,000 ended up owing more than £300,000. This is a difficult situation for someone whose financial health is already poor.
Many illegal lenders ask for weekly repayments of a specified sum. Given the interest charged, this will make only a small dent in the amount owed. Unlike regulated credit providers, illegal lenders will not look kindly on late payments or defaults. In fact, they are likely to turn up on your doorstep looking for payment and will use violence and threats to force you to pay. If no payment is forthcoming, they may even take your prized possessions and sell them to make back their money.
Since illegal lenders operate outside the law, it can be difficult to get recompense for bad treatment. Although consumers have greater powers under the revised Consumer Credit Act, the best organisations for reporting illegal lending practices are the Office of Fair Trading (OFT) and the Department of Trade and Industry (DTI). These organisations can investigate and, in some cases, prosecute illegal lenders.
This is particularly effective if you can prove that illegal lenders have misinformed you about the terms of the loan. This type of mis-selling is known as unfair lending. It carries a prison term of up to 2 years and a fine of up to £5,000. While this is a fraction of what illegal lenders are making from the more than 7 million Brits in their clutches, it might put a stop to some cases.
Chances are if you were shopping for a home theatre system, you would shop around to find the best deal. So why not shop around for a loan?
What is the one thing that all financial advisors tell their clients before committing to any financial agreement? It is the most basic rule of all commerce; do you homework and shop around.