Answer extracted from The Responsible Finance Podcast — listen to the full episode below.
Who borrows from illegal money lenders? Income, employment & loan amounts revealed
People who resort to illegal money lending are not the unemployed or destitute: they earn between £20,000 and £25,000 annually, with 70% currently employed. They borrow modest sums—averaging around £3,000—mostly for immediate survival needs like food, household bills, and seasonal expenses.
This surprising profile emerged from research conducted by Fair4All Finance, which interviewed 287 people with lived experience of illegal lending across four UK sites: Glasgow, Port Talbot, Preston, and South London. The data challenges the common assumption that illegal borrowers are economically marginal.
What distinguishes this group is not poverty in absolute terms, but exclusion from legal credit markets. These working people cannot access bank loans or credit cards—the formal financial doors are closed to them—so they turn to illegal lenders as their only option. As Neil Alexander explains in the episode, "If people cannot access forms of credit in a legal way, they will begin to access it in an illegal way."
Employment status reveals a crisis in credit access
The employment picture is striking: 70% of current users of illegal credit are in work. Yet when researchers tracked former users, that figure dropped to 52%—suggesting that reliance on illegal lending can itself become destabilizing, pushing people toward unemployment rather than offering a path out of it.
This employment data, detailed in the podcast discussion, exposes a systemic failure: working people with stable income still cannot access legal credit. The problem is not that they lack jobs; it is that the formal financial system has written them off as too risky. Their exclusion forces them into debt traps run by illegal operators who charge rates far higher than any licensed lender would be permitted to offer.
Borrowed sums track basic living costs
The average loan of around £3,000 was borrowed in small sums over time, not as a single lump sum. The research found these loans went overwhelmingly toward non-discretionary expenses: food shopping, utility bills, Christmas presents for children, birthday celebrations, and rent shortfalls. These are not luxury purchases or business ventures—they are the costs of staying housed, fed, and connected to family life.
As covered more deeply in this episode on Fair4All Finance's work, the typical illegal lending transaction begins as a genuinely urgent need: a family facing a shortfall before payday, or a parent unable to give a child a birthday present. The illegal lender fills that gap quickly, with no credit checks—and then the trap closes, as interest and repeat borrowing make escape nearly impossible.
"If people cannot access forms of credit in a legal way, they will begin to access it in an illegal way."
Neil Alexander — Markets and Consumer Insights Manager, Fair4All Finance. Neil has spent decades working in financial inclusion and community development, tracing his work back to the Tony Blair government's Policy Action Team 14 in 1997 focused on financial exclusion. He was a community worker who helped establish the Westerhales Community Banking Agreement with Bank of Scotland, opening approximately 1,800 bank accounts for unbanked people in an 18-month period. He has subsequently worked as a consultant with multiple CDFIs, for Bank of Scotland, Moneyline, Carnegie UK Trust, and Michael Sheen's End High Cost Credit Alliance before joining Fair4All Finance in August 2021.
One detail worth exploring further: the research also gathered data on the actual rates charged by illegal lenders and how they compare to legal alternatives—a point discussed extensively in the full episode but only hinted at here.
Key takeaways
- Illegal credit users earn £20,000–£25,000 per year and are not unemployed—70% have jobs
- They borrow modest amounts (averaging £3,000) for food, bills, and seasonal family costs
- Exclusion from legal credit markets—not poverty—drives the use of illegal lenders
- Former users drop to 52% employment, suggesting illegal lending destabilizes long-term work stability
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