100,000 poorest families crippled with £82 million debt this year

Housing group Circle Anglia on Friday warned that an estimated 100,000 poorest families would be crippled with £82 million of debt during 2010 after borrowing money from loan sharks to fund the cost of Christmas. These people are in dire need of debt advice, the group said.

Andy Doylend, executive director of operations at Circle Anglia, said, “These figures are very concerning and demonstrate the scale of illegal lending across the UK. We hope that by turning the spotlight on loan shark activity we can help more people to seek help and get sound financial advice.”

According to a research made by Circle Anglia, low income families borrowed an estimated £29 million from illegal lenders to fund the festive season last December. But the interest rates offered by these loan sharks ranges between 825 percent and 1,500 percent. The amount of money borrowed could reach up to £82 million when matured, the group said.

Circle said it commissioned the study after a marked increase in the number of residents being targeted by loan sharks was noticed. It said that this Christmas had been the worst in a generation for borrowing from illegal lenders.

“A simple step such as borrowing from a credit union or a community finance organisation instead of a loan shark could have saved the typical low-income household £500 in debt repayments – more than enough to fund the whole of Christmas 2010 as well,” Doylend said.

Poor families on average borrowed at least £300 from loan sharks to cover the cost of the festive season, but they would end up paying back more than £800 and were likely to still be in debt in the run up to Christmas this year.

The report, added that there had been a 22 percent rise in the number of people resorting to loan sharks during the past three years. In 2009, an estimated 200,000 turned to these illegal lenders, the study said.

Separate research carried out by Wherry Housing Association in Norfolk found that one in four tenants had been offered a cash loan. Around five percent of them admitted they were not given any paper work to show how much they had borrowed or how much they owed.

Another nine percent of the respondents said that the amount they owed continued to grow despite consistent payments and three percent said they had been threatened with violence when they could not repay the money.