Sometimes we all need to borrow. For many, a bank or building society is the obvious place to turn. But what other options are available for those who would rather use a local organisation, want a not-for-profit lender, have a limited credit history, or simply don’t know where else to go?
This is sometimes when loan sharks step in, offering what appears to be a quick and easy solution.
While they may present themselves as friendly and helpful, borrowing from a loan shark can have serious financial, emotional and long-term consequences. The good news is that there are safer, regulated alternatives available.
Credit unions and Community Development Finance Institutions (CDFIs) provide safe, responsible lending designed to help people access money when they need it most, without the risks associated with illegal money lending.
What is a Credit Union?
A credit union is a not-for-profit financial co-operative owned and run for the benefit of its members.
Unlike traditional banks, credit unions do not exist to generate profits for shareholders. Instead, any surplus income is reinvested into improving services or returned to members.
Credit unions typically offer:
- Savings accounts
- Personal loans
- Current accounts (at some credit unions)
- Budgeting support
- Financial education and guidance
Because they are community-focused, credit unions often take a more personal approach to lending. They aim to understand an individual’s circumstances rather than relying solely on automated decisions.
Many people find credit unions particularly valuable because they combine safe borrowing with support to build savings and improve long-term financial wellbeing.
What is a CDFI?
Community Development Finance Institutions (CDFIs) are organisations that provide responsible finance to people, businesses and communities that may struggle to access mainstream credit.
Their mission is to tackle financial exclusion and help create stronger local economies.
CDFIs commonly offer:
- Personal loans
- Business loans
- Financial guidance
- Fair and transparent lending
CDFIs focus on the social impact of lending rather than maximising profits. They often work with people who have been declined by mainstream lenders or who have a poor credit history but still need access to fair borrowing options.
For many borrowers, a CDFI can provide a vital stepping stone towards improving their financial situation.
How are Credit Unions and CDFIs different from banks?
Banks’ lending decisions are often based on standard criteria such as credit scores, income levels and affordability assessments.
For some people, meeting these requirements can be difficult.
Credit unions and CDFIs differ because they often:
- Focus on helping local communities
- Offer smaller, more manageable loans
- Consider applicants with limited credit histories
- Take a more personalised approach to lending decisions
- Reinvest profits to benefit members and communities
Importantly, credit unions, CDFIs and banks are all regulated organisations that must follow rules designed to protect borrowers.
Why are Credit Unions and CDFIs safer than loan sharks?
The biggest difference is simple: Credit unions and CDFIs are legal, regulated lenders.
Loan sharks operate outside the law. They may add excessive charges, fail to provide paperwork and use intimidation, threats or harassment to collect repayments.
- Regulated and accountable
Authorised lenders must follow strict rules designed to protect consumers and ensure lending is fair and responsible.
- Transparent costs
You will be told exactly how much you’re borrowing, what your repayments will be and the total cost of the loan before agreeing to anything.
- Affordability checks
Responsible lenders assess whether a loan is affordable before lending money, helping to prevent people from taking on debts they cannot manage.
- Support if you struggle
If your circumstances change and you’re having trouble repaying a loan, regulated lenders have processes in place to help. They will work with you to find a solution rather than using threats or intimidation.
- Legal protection for borrowers
Borrowers using authorised lenders have access to complaints procedures and consumer protections that are simply not available when dealing with loan sharks.
Warning signs of a loan shark
Not sure whether a lender is legitimate? Watch out for these warning signs:
- They refuse to provide paperwork.
- They don’t carry out affordability checks.
- They add unexpected charges and fees.
- They threaten, intimidate or harass borrowers.
- They take bank cards, passports or valuables as security.
If any of these situations sound familiar, help is available.
How safe borrowing protects more than your money
Choosing a regulated lender isn’t just about finding a loan. It’s about protecting your mental wellbeing, your family and your future.
Many people who borrow from loan sharks report feeling trapped, anxious and fearful. Some face constant pressure to repay, while others find debts spiralling far beyond what they originally borrowed.
Credit unions and CDFIs are designed to do the opposite. Their goal is to support people, provide affordable borrowing and help individuals build financial resilience over time.
Worried about a loan shark? Help is available
If you’ve borrowed from a loan shark, been approached by one, or are concerned about someone else, you do not have to deal with it alone.
The England Illegal Money Lending Team – known as Stop Loan Sharks – investigates and prosecutes loan sharks while providing confidential, non-judgemental support to borrowers.
You can contact the Stop Loan Sharks team 24 hours a day on 0300 555 2222. Support is also available through Live Chat and WhatsApp during service hours – see below.
Stop Loan Sharks works closely with credit unions and CDFIs across England to promote safe borrowing and raise awareness of the alternatives to illegal money lenders. One initiative is a savings incentive scheme, which rewards people for joining a credit union and developing a regular savings habit. The scheme is funded using money confiscated from convicted loan sharks under the Proceeds of Crime Act.
To find a credit union near you go to: https://www.findyourcreditunion.co.uk/
To find a CDFI go to: https://responsiblefinance.org.uk/
