Over 3m people across the UK admit they have been forced to borrow from illegal lenders in the last 12 months, reveals research from responsible lender Creditspring.

A third (31%) of people in the UK say they currently feel stuck and that there is nothing they can do to improve their financial situation** – this has led to almost one in twelve (6%) UK adults to borrow from an illegal lender in the past 12 months.

A fifth (19%) – around 611,000 people – say they had to turn to illegal lending options as they needed the money for everyday expenses such as food and household bills whilst 15% needed the loan to afford their rent or mortgage.

One in six (16%) people admit that they were aware that they were using an illegal lender but had no other option after they were refused credit from regulated lenders.

Illegal lending carries many risks to borrowers – one in seven (15%) people said that the interest originally agreed has increased over time whilst 14% have been threatened with physical violence. This is hugely concerning especially given 15% of people who borrowed from illegal lenders admit they don’t know how they’ll be able to repay these loans - many are likely to have to borrow even more to repay existing debts.

The research also shows that younger people are much more likely to have to turn to illegal lenders than the older generation – 13% of 18–34-year-olds admit they borrowed from unregulated lenders in the last 12 months, compared to 5% of those aged 35-54 and just 1% of over 55s.

Creditspring explains that the number of people forced to turn to illegal lending to get by is driven by the lack of affordable short-term credit options available. Over a quarter (27%) of people say they turned to a high-cost credit lender this year as they were rejected by mainstream lenders.

Previous research from the Centre for Social Justice in 2022 estimated that 1.1 million people across England took loans out with illegal lenders. Creditspring’s research indicates that reliance on illegal lenders has soared as the cost of living crisis has continued.

Neil Kadagathur, CEO at responsible lender Creditspring comments: “The cost of living crisis has decimated household finances across the UK and the growing reliance on the wild west of illegal lending is the starkest indicator yet of just how bleak the financial reality is for millions of people.

“Illegal lenders thrive on the desperation of borrowers who have exhausted all their mainstream options and are left with nowhere else to turn. These predatory lenders often offer extortionate interest rates and additional fees which borrowers have little choice but to accept – after all, if an illegal lender whacks on an unexpected charge, there is no formal complaints process to support borrowers. Plus, there are the horror stories of the hidden costs of illegal lending that can go even further than a financial punishment. 

“The need for greater access for responsible, short-term credit lending has never been clearer. It’s critical that providers offer clearer, more transparent and safer loans for borrowers who need a financial boost so they aren’t forced into the murky world of illegal lenders.”

Creditspring provides a new way to access credit safely. FCA-regulated, it is a credit subscription service that responsibly offers short-term, affordable credit to borrowers. Members pay a fixed membership fee every month to allow them to access two no-interest loans per year with clear repayment terms, capped costs and no hidden charges, late fees or confusing interest rates.