More than two million people across the UK are now believed to be borrowing from illegal money lenders, as recent research highlights a growing problem linked directly to rising household costs and tightening finances. The Centre for Social Justice (CSJ) analysis shows that the number of borrowers turning to loan sharks has increased by around 500,000 since last year.
This rise comes as many households face ongoing cost-of-living challenges, struggling to cover essential expenses such as groceries, utility bills and other unavoidable costs. The research draws attention to the widening gap in access to regulated credit services, which is forcing some people into riskier borrowing arrangements.
The CSJ’s new findings, based on data from the Illegal Money Lending Team (IMLT), reveal that the traditional image of loan sharks as anonymous, violent figures no longer fits the reality for many. Instead, two-thirds of those who borrow from illegal lenders come into contact with them through friends or family, with many seeing their lender as a trusted community contact before borrowing.
Social pressure and modern-day tactics have become common, too. Nearly 30% of borrowers reported facing threats of social media shaming if they failed to repay, indicating increasing use of psychological coercion in place of physical intimidation. This was a key theme in a previous 2022 CSJ report, highlighting changing tactics in illegal lending.
For many borrowers, the decision to seek out illegal credit stems from difficulty accessing regulated financial products. Almost three-quarters of those considering lawful credit said they were refused. The reasons for turning to loan sharks included not only everyday living costs but also paying for funerals, weddings, vehicle repairs and supporting family members.
These findings are drawn from an Opinium survey of just over 4,100 adults commissioned by the CSJ. It found that 3.7% of respondents admitted to currently borrowing money from someone locally who charges interest but is not a legitimate lender, such as authorised banks, payday lenders or credit unions.
The CSJ recommends stronger enforcement against illegal lending, particularly addressing the harassment of victims on social media under the Online Safety Act. It also calls for expanded access to affordable, regulated credit and improvements to debt advice services. These proposals include better training for advisors and clearer referral routes to teams like the IMLT.
Ben Gregg, Head of Welfare at the CSJ, said many borrowers remain unaware they are dealing with illegal lenders and often continue repaying debts even after the lender has been prosecuted. He underlined that the suggested policy changes would not be costly but could have a meaningful impact for those caught in these lending networks.
John Pears, UK CEO of credit management firm Lowell, noted the rise in loan shark borrowing exposes how fragile many household finances have become. With unsecured consumer debt across Britain exceeding £250 billion, many lack sufficient financial buffers, leaving them vulnerable to even small shocks.
He emphasised that tackling illegal lending requires not just enforcement but also addressing underlying financial vulnerability. Strengthening household financial resilience and ensuring affordable credit options are available must form part of the solution.
This increasing reliance on illegal lenders is a clear sign of pressure on household budgets and gaps in the financial system’s support for those in need. The highest risk appears to be for those who cannot access mainstream credit, whether due to low income, poor credit history or other barriers.
For readers, the key takeaway is to be aware of the risks tied to informal borrowing arrangements. If facing difficulty obtaining credit through regulated channels, seeking free debt advice early and understanding safer borrowing options can help avoid potentially harmful loan shark debt.
Currently, the government and regulatory bodies are examining ways to improve support and enforcement. Meanwhile, householders are encouraged to stay informed about their rights and available financial services to protect against illegal lending practices.
