With the recession getting worse by the day, sadly a growing number of people are turning to loan sharks to get hold of some money to pay their bills. Figures in the UK suggest that there could be an increase of around 35,000 who borrow money form loan sharks. Some cities are being mentioned as being those most likely to see the biggest increases due to the economic situation.

The main reason for people looking to use these illegal money lenders is because traditional sources of loans, from banks, loan companies, and building societies, has all but dried up. Loan companies aren`t as keen as they once were to lend. When they do offer loans, they search out not the ones who are desperate for the money, but those are very good risks, who are unlikely to default on their payments. The problem is that it`s those who aren`t viewed as good risks who end up paying scandalously high interest when they use loan sharks. They are the ones who can least afford it. A loan which might, say, be otherwise paid back at a normal rate of interest can end up being paid back over years. That`s because of the interest outweighing the amount borrowed.

Normal lenders are regulated about how they offer loans, how much interest they are allowed to charge, clarity of the contract, along with inbuilt safeguards for the borrower. Those who operate outside of the law make up their own rules as they go, and sometimes enforce those rules to anyone who can`t or won`t repay. Basically there are no terms and conditions on a piece of paper which both parties must stick to.

With over 160,000 people in Britain already having used loan sharks in the past, the future looks bleak, and many are calling for credit unions to do more to help the most vulnerable in society. Some councils are very proactive at setting up credit unions up, but others could do much more. If better provisions aren`t made to help the poor, then many people are going to end up in a real financial mess for years to come.