What to do if you owe money to a loan shark in Scotland?

The cost-of-living crisis is having an increasingly damaging impact on the people of Scotland, with 7% saying they, or someone they live with, has interacted with an illegal money lender.  

When times are tough, it can be difficult and sometimes impossible to get your hands on the money you need through regulated means. That is leaving many people with little choice but to turn to a loan shark to make ends meet and pay their essential bills. 

Initially, getting quick access to cash can bring a sense of relief. However, borrowing money from any unlicensed lender is never a good option. While they may seem friendly and helpful initially, high rates of interest, unexpected charges and pressured repayment demands can leave you struggling to find a way out. 

If you owe money to a loan shark in Scotland, it may not feel like it, but you do have options. Here we explain the steps you can take to protect yourself, find support and rebuild your finances via formal debt solutions.

What is a loan shark?

A loan shark is anyone, whether it’s an individual or a business, who lends money for profit but isn’t authorised to do so by the Financial Conduct Authority (FCA). Anyone who does is breaking the law.   

A family member or friend who gives you an informal loan is not considered a loan shark. That’s because they are not running a business of lending money for profit. However, if that family member were to start lending money to multiple people and charging interest, or harassing you for repayment, that would also be illegal lending. 

The tell tale signs of a loan shark include:

• Unreasonably high interest rates that far exceed those of licensed lenders 
• A lack of paperwork and no formal or written loan agreements
• Providing cash loans rather than paying the money via bank transfer
• A lack of information about the loan, including what you owe or the rate of interest
• Unfair charges, with debts increasing unexpectedly, even when you have made the agreed repayments
• Taking personal items as ‘security’, such as valuables or a bank card
• The use of intimidation, harassment and threats of violence to encourage you to make payments

The crucial point here is that the loan itself is likely to be illegal, and you do not have to pay it back. Contacting these agencies will help you escape the cycle of debt, protect yourself from harm and access support services so you can rebuild safely. 

Long-term steps: financial recovery

Once you’ve removed the immediate pressure of the loan shark and their escalating interest rates and charges, the next step is to gain control of your finances through legitimate, regulated means.

Taking control of your money

If you struggle from month to month but do not have existing debt problems, drawing up a budget will help to give you a clearer view of your finances. 

Start by listing all your income and expenditure, such as rent, utilities, food and transport, then identify areas where you can cut back on non‑essential expenses or potentially increase your income. The aim is to be able to set aside a small amount for savings each month, even if it’s modest. 

If there’s no flexibility in your budget, seek advice from free and regulated services like StepChange, Citizens Advice Scotland and National Debtline. They will help you explore your options, including benefits you may be entitled to, fuel vouchers from your local council and affordable sources of short-term credit, such as credit unions. 

Managing your debts

If you are struggling with debt, seeking out a source of reputable debt advice can help you regain control. At Scotland Debt Solutions, we provide free and confidential debt advice to help you get to grips with credit card debts, council tax and mortgage arrears, utility bills, sheriff officers, unmanageable overdrafts, unaffordable car payments and more. 

Regardless of your level of debt, we can advise you on Scotland-specific debt solutions that will help you build towards a sustainable financial future, including:

• Debt Arrangement Scheme (DAS) - This government-backed scheme enables you to repay multiple debts through a single, affordable payment plan over an agreed period. It removes the threat of legal action and freezes any interest, fees and penalties at the start of the scheme, and often waives them on completion. 
• Trust Deed - A Trust Deed supports those with unsecured debts who cannot realistically afford to repay them in full. You will make affordable monthly payments over a fixed period (usually four years), and any debts you cannot pay will usually be written off.  
• Sequestration - If you have severe debts you cannot pay, Sequestration may be the most suitable option. It can write off most of your unsecured debts, but you may have to sell assets to repay your creditors where possible. Sequestration will remain on your credit record for six years, making it difficult to obtain credit or a mortgage.  

Do you owe money to a loan shark?

If you owe money to a loan shark that you are struggling to repay, we provide free and confidential advice to help you understand your options. We are regulated by the FCA and will work with you to find a realistic and affordable way to regain control of your finances through formal debt solutions.  

Get in touch with your local office, arrange a home visit or have a confidential chat with one of our advisers on WhatsApp to start your journey towards a debt-free future.