Poor families turned to loan sharks to fund their Christmas instead of sourcing legitimate help.

Illegal loan sharks loaned an estimated £29 million to some of the UK’s poorest families over the Christmas period – the highest figure for a generation according to think tank the Financial Inclusion Centre.

The Real Cost of Christmas report was commissioned by Circle Anglia – one of the UK’s leading providers of affordable housing – after it noticed a rise in its number of residents being targeted by loan sharks.

Its research found that on average people borrowed around £300 from loan sharks to cover the cost of Christmas. However, extortionate interest rates which average 825% would mean the amount to be paid back is more like £800 – taking borrowers until next Christmas to pay it off.

Andy Doylend, Executive Director of Operations at Circle Anglia, was alarmed at the figures: “We hope that by turning the spotlight on loan shark activity we can help more people to seek help and get sound financial advice.”

Mr Doylend said instead of turning to loan sharks people should seek financial help from a credit union or a community finance organisation – which could save the typical low income household £500 in debt repayments.

Wendy Alcock, MoneySavingExpert.com Analyst, commented: “Payday loans rarely help people get back in control. Instead, borrowers often get caught in a debt spiral.”

Loan sharks are illegal in the UK and according to Consumer Minister Kevin Brennan, Trading Standards teams have helped more than 10,000 victims of this type of lending, writing off more than £30 million of illegal debt.

However, government and debt advice firms can only do so much in educating people to avoid taking loans from these illegal sources. This type of hardship loan is nothing new; maybe it is time that people started to take more responsibility for themselves.

Although an extremely unfortunate situation to be in, people should not feel pressured to buy all those Christmas presents if they really cannot afford them. Looking back fifty years it was more than acceptable to make gifts. Today’s society and its greed for such a materialistic lifestyle needs to be stripped back.

After all is it not the mountainous borrowing and years of living beyond our means which has resulted in the most recent recession? In 2008 the UK recorded its highest number of repossessions and that figure was expected to reach a new high in 2009.

Maybe we should be applauding those banks who are implementing restrictions on their lending. As taxpayers we have already rescued a number of the big banks from collapse, if we condone a lenient lending nature again are we not inviting a repeat performance?