How to Borrow Safely in the UK
1 July – written by Steffen Kemmerzehl – Friendly Assist Accountancy – Blog
When most people hear the words loan shark, they imagine organised crime, large sums of cash and scenes from television dramas. The reality is often very different.
Many illegal lenders look just like ordinary people. They might be someone in your local community, someone recommended by a friend, or even someone advertising on social media. They often promise quick cash, “no credit checks” and instant approval when someone feels they have nowhere else to turn. Unfortunately, what starts as a small loan can quickly become a much bigger problem.
Financial pressure can affect anyone. Whether it’s an unexpected tax bill, rising household costs or reduced income, many people find themselves looking for quick access to money. Unfortunately, that’s exactly when illegal lenders often target vulnerable borrowers.
At Friendly Assist Accountancy, we regularly speak to people who are under financial pressure. They may be worried about tax bills, cash flow, unexpected expenses or simply making ends meet. While we don’t provide loans, we do help people understand their finances and avoid situations that can make financial problems even worse.
If you’d like support with your tax or finances, you can find out more on our UK Tax Help for Individuals, Landlords, Self-Employed People and Small Businesses page.
What exactly is a loan shark?
A loan shark is someone who lends money illegally without being authorised by the Financial Conduct Authority (FCA).
Unlike legitimate lenders, loan sharks operate outside the UK’s financial regulations. That means they don’t have to follow the rules that protect borrowers. Many people are surprised to learn that loan sharks don’t always charge enormous amounts of interest straight away.
Instead, they often gain trust first. A small loan might seem manageable at first. Then extra charges begin appearing, repayment dates change, more money is offered, or interest keeps increasing until the debt feels impossible to clear.
Some borrowers also experience intimidation or pressure if repayments become difficult.
How can you spot a loan shark?
There are several warning signs.
Be cautious if a lender:
- Doesn’t provide a written agreement.
- Refuses to explain exactly how much you’ll repay.
- Doesn’t carry out affordability checks.
- Wants your bank card or passport as security.
- Doesn’t provide receipts.
- Keeps changing how much you owe.
- Pressures you into borrowing more.
- Uses threats or intimidation.
Legitimate lenders are required to be transparent. Loan sharks usually avoid paperwork because they don’t want a clear record of what they’re doing.
Does borrowing from a loan shark improve your credit score?
This is one of the biggest misconceptions. The answer is simple.
No.
Loan sharks do not report repayments to Experian, Equifax or TransUnion.
They don’t help build your credit history. They don’t improve your credit score.
Even if you repay every penny on time, your credit file will not benefit because the loan exists entirely outside the regulated financial system.
Likewise, if repayments become difficult, the debt generally won’t appear on your credit report either.
Instead of following normal debt collection procedures, illegal lenders may use methods that legitimate lenders simply cannot.
Why do people end up borrowing from loan sharks?
It’s easy to assume people knowingly make bad decisions. In reality, most borrowers are simply under pressure.
Some common reasons include:
- Poor credit history.
- Unexpected household bills.
- Losing employment.
- Reduced working hours.
- Business cash flow problems.
- Unexpected HMRC bills.
- Emergency repairs.
- Rising living costs.
These situations can affect anyone.
For many self-employed people, an unexpected tax bill is enough to create serious financial pressure. If you’ve fallen behind with your tax affairs, it’s often worth seeking advice before considering borrowing.
You may find our HMRC Time to Pay Arrangement Help UK Tax Debt Support page useful if you’re worried about paying HMRC.
Good lenders want to know if you can actually afford to borrow
Responsible lending isn’t about making borrowing difficult. It’s about making sure borrowing doesn’t make your situation worse.
A legitimate lender should:
- Carry out affordability checks.
- Explain interest clearly.
- Tell you exactly what you’ll repay.
- Provide written documentation.
- Treat customers fairly if financial circumstances change.
If none of those things happen, it’s worth asking yourself why.
What if you’ve already been refused credit?
Being declined by a bank doesn’t always mean you’ve run out of options.
Before considering expensive borrowing or an illegal lender, it’s worth looking at safer alternatives.
Credit unions
Credit unions are community-based organisations that often offer affordable loans. They may consider your overall financial situation rather than relying only on your credit score.
Community lenders
Some FCA-authorised lenders focus on affordability instead of simply rejecting applicants with poor credit histories.
Credit builder products
These are designed to help improve your credit history through regular repayments, making it easier to access mainstream finance in the future.
Government support
Depending on your circumstances, you may qualify for Budgeting Loans, Budgeting Advances or other local support.
Free debt advice
If you’re already struggling, free debt advice can help you understand your options before taking on more borrowing.
Always check that a lender is authorised by the Financial Conduct Authority (FCA). Borrowing from an illegal lender rarely solves the problem—it usually makes it worse.
How to report a loan shark and get help
If you think you’ve borrowed from a loan shark, remember that help is available.
Many people worry they’ve done something wrong, but the focus is on protecting borrowers and investigating illegal lenders.
Loan sharks often rely on fear and intimidation to stop people seeking help. If you believe you’re dealing with an illegal money lender, seek confidential advice as soon as possible. If you feel threatened or are in immediate danger, contact the police straight away.
Financial problems can affect anyone, whether they’re caused by rising living costs, poor credit, business cash flow or an unexpected HMRC tax bill. Getting advice early usually gives you more options.
At Friendly Assist Accountancy, we help clients understand their finances, improve cash flow and plan for future tax bills. While we don’t provide loans or debt advice, better financial planning can often prevent money problems from becoming much more serious.
Sometimes the real problem isn’t borrowing
One thing we’ve noticed over the years is that borrowing often isn’t the root cause.
The underlying issue is frequently something else.
It could be:
- Poor budgeting.
- Falling behind with bookkeeping.
- Unexpected tax liabilities.
- Cash flow issues.
- Not putting money aside for future tax bills.
These are all problems that can usually be improved with planning.
For many small business owners and sole traders, understanding what tax is coming and when can completely change their financial position.
If you’re unsure whether you’re meeting your tax obligations, our Self Assessment Tax Return Help UK page explains how we can help.
How Friendly Assist Accountancy helps
People often assume accountants only become involved once a year when it’s time to submit a tax return. We see things differently.
Our aim is to help people understand their finances throughout the year, not just at filing deadlines.
That could mean:
- Explaining upcoming tax liabilities.
- Improving cash flow.
- Helping people budget.
- Keeping bookkeeping organised.
- Supporting business growth.
- Helping clients understand HMRC requirements.
Many financial problems can be reduced or avoided entirely through better planning.
See the range of services we provide and plan your finances.
Looking after your financial future
Whether you’re employed, self-employed or running a growing business, understanding your finances is one of the best investments you can make.
Avoiding illegal lenders is only one part of that.
Planning ahead, understanding your tax obligations and keeping good financial records can all reduce stress and help you make better decisions.
If you’re looking for practical, friendly accounting support, we’d be delighted to help.
You can also explore more practical tax and finance articles in The Accounting Hub.
Frequently Asked Questions
Are loan sharks illegal?
Yes. Loan sharks lend money without the required FCA authorisation and operate outside UK financial regulations.
Do loan sharks affect my credit score?
No. They don’t report to UK credit reference agencies, so borrowing from them won’t improve your credit history.
Why are loan sharks dangerous?
They may charge excessive interest, add hidden fees, change repayment terms without warning and sometimes use intimidation or threats.
What should I do if I’ve been refused credit?
Before considering expensive or illegal borrowing, explore regulated alternatives such as credit unions or seek professional financial advice.
Can an accountant help if I’m struggling financially?
Yes. Many financial problems begin with poor cash flow planning or unexpected tax liabilities. A good accountant can help you understand your finances, prepare for future tax bills and identify practical ways to improve your financial position.
Financial problems rarely improve by being ignored. Whether you’re worried about an unexpected tax bill, cash flow, Self Assessment or simply want to get your finances back on track, Friendly Assist Accountancy is here to help. If you’d like to explore this more, please get in touch
Steffen Kemmerzehl
I am a qualified AAT accountant in Newcastle upon Tyne.
Please get in touch if you’re interested in arranging an appointment.