The Real Cost of Christmas: Families expected to repay £82 million debt to loan sharks

A report released today has highlighted that some 100,000 of the UK’s poorest families will the start the New Year by facing a collective debt of around £82 million. The report, entitled The Real Cost of Christmas, has outlined the staggering amount of debt that has been accrued as a result of families borrowing money illegally from ‘loan sharks’ in order to pay for Christmas expenditures in 2009.

Produced by The Financial Inclusion Centre and commissioned by Circle Anglia, the report shows that in an attempt to pay for Christmas, the average UK person borrowed an average of £288 from a loan shark. However, it is anticipated that the average person will end up paying back £820, incredibly almost three times the amount they initially borrowed, as a result of the high interest rates charged.

Circle Anglia, one of the principal suppliers of affordable housing in the UK, chose to commission the report in order to warn residents who find themselves confronted with financial problems of the dangers of borrowing money from loan sharks. The findings of the report outlines that approximately £29 million of illegal loans were taken out throughout the festive period, resulting in Christmas 2009 being the worst holiday period for borrowing in recent times.

The report states that on average these families can expect to pay their loan back with 825% interest rate imposed. However, in some cases it is thought that the interest rate could be as much as 1,500%. With many of the families in question requiring more than a year to repay their debts to the loan sharks, it is expected that many families will still be struggling with debt by Christmas 2010.

In addition, the report has also uncovered that throughout the last three years there has been an increase in activity amongst loan sharks. In fact, a 22% rise in the number of households borrowing money from loan sharks was noted, equating to an increase from 165,000 households undertaking illegal borrowing three years ago to 200,000 households.

While the statistics of this report are alarming, there is hope that by highlighting the extent of the problem of illegal lending throughout the UK, more people will ask for help and acquire advice from reliable financial and debt management sources.

Those in debt considering taking high interest loans are advised to seek out debt help before proceeding with any credit agreement. Individuals in the United Kingdom suffering with debt after the Christmas period should consider contacting a debt expert for free advice on what debt solutions are appropriate for their financial situation.

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