Over three million people in the UK may have borrowed from illegal lenders in the past 12 months, Creditspring has found.

A survey of 2,000 UK adults by the lender revealed that 31% said they currently feel stuck and that there is nothing they can do to improve their financial situation.

This has led to 6% borrowing money from an illegal lender in the past year.

Of those who borrowed from illegal lenders, the study found that around 611,000 people (19%) had to turn to illegal lending options as they needed the money for everyday expenses such as food and household bills, while 15% needed the loan to afford their rent or mortgage.

Chief executive officer at Creditspring, Neil Kadagathur, said: "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."

One in six (16%) people admitted 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 a number of risks to borrowers, with one in seven (15%) saying that the interest originally agreed has increased over time, while 14% have been threatened with physical violence.

The research by Creditspring also revealed that younger people are more likely to turn to illegal lenders, with 13% of 18-34 year olds admitting that they have borrowed from unregulated lenders in the last 12 months.

This compares to 5% of those aged between 35 and 54 and just 1% of over-55s.

Kadagathur added: "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."

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