Over 100,000 of the poorest families in the UK borrowed from an illegal loan shark to fund Christmas and will now be saddled with debt management issues as they struggle to repay the extortionate interest rates levied.

Poorest households targets of loan sharks

Think tank the Financial Inclusion Centre authored the report, which was commissioned by affordable housing provider Circle Anglia, after it noticed an increase in the number of its residents being targeted by loan sharks.

The Real Cost of Christmas report also found that the loans from illegal lenders have forced thousands of households further into debt – to the tune of around £82 million.

During the festive period, families borrowed approximately £29 million in illegal loans from doorstep lenders – equating to an average of almost £300 per household.

With interest rates on illegal loans averaging around 825 per cent, many will still be repaying debts next Christmas, as they’ll be expected to repay closer to £800 during 2010.

22 per more people are using loan sharks than three years ago, up from an estimated 165,000 three years ago to roughly 200,000 a year in 2009, the report found.

Ivan Cooper, Chairman at debt management specialists Chiltern, said: “More people have resorted to use illegal doorstep lenders as often they aren’t aware of the many alternatives to get out of debt.

“Borrowing more money, especially at the ridiculous interest rates that are charged by loan sharks, is not the best way to sort debt management issues.

“It’s much better to seek impartial debt advice from a professional organisation, such as Hamilton Locke, The Debt People or Chiltern.”