The Citizen Advice Bureau has issued a warning for borrowers struggling to get credit from their banks and building societies. They have been urged to beware of companies offering fake loans for a fee.
The agency says that it has enough evidence to prove that there are bogus companies out there in the market who are preying on people who are already in debt. These companies offer fake loans by advertising directly on the internet or sometimes via a cold call or text. The modus operandi is to persuade borrowers to pay an initial set up fee that can range from anything between £35 to £2,000 to secure a loan, and then ask for bank account details too. As you may have guessed, the promised loan then fails to materialize.
Director of policy at Citizens Advice, Teresa Perchard, said: “In a recession loans can be hard to get, and people falling into debt or unable to get mainstream credit are being targeted with ads and direct contacts offering loans that really are too good to be true.”
She further pointed out that the problem is further likely to be compounded with public sector cuts because of cutbacks in services such as Trading Standards that are in a position to crack down on rogue lenders.
Research conducted by R3, a trade body for insolvency practitioners, shows that up to 67,000 or 7% of people struggling with debts have contacted a loan shark or doorstep lender, while a further 13% have considered doing so.
R3 president, Steven Law, said: “Going to this source for financial resolution will simply build up a larger store of debt and create more pressure and stress. We must highlight the importance of obtaining professional advice over panic measures that will worsen the problem.
“Post-recession we stand on the brink of a personal insolvency crisis that will take years to work through the system, as this finding indicates.”
Stress does take its toll when you are in debt but it is essential to proceed cautiously and seek debt advice before deciding on a course of action. Most reputed debt management companies in the UK offer debt advice for free and by consulting them you can avoid falling into more difficult situation.
There are many debt management plans like an IVA (Individual Voluntary Arrangement) that enable you to pay off your debt without taking further loans. Remember, advice and help is at hand if you’re struggling and help and guidance.