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More than 100,000 families are paying back Christmas debts at a crippling interest rate of up to 1,500 per cent after being targeted by loan sharks. Borrowers in housing estates are believed to be repaying £29million in loans dished out by illegal doorstep lenders during December. Evidence compiled by housing associations shows that on average these desperate residents borrowed £300.

But the exorbitant rates of interest – which are often around 825 per cent, but can be as high as 1,500 per cent – mean that families repay around three times the amount they originally borrowed. Many will still be paying for their debts next December. Housing association Circle Anglia and think-tank The Financial Inclusion Centre estimate that more than 200,000 families a year are lured into using loan sharks who knock on their door.

This is an increase of almost a quarter on the previous year.

Fears are growing that the rise in loan sharks occurred because so many families are being shut out of mainstream banks and building societies by tougher credit scoring. Loan sharks do not have a consumer credit licence and are not authorised to lend money. As a result, the consumer has no protection from being mis-sold.

The Trading Standards’ illegal money lending teams have helped more than 10,000 victims of illegal lenders in the past year and have written off more than £30million debt.

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