Adam Fox went to a loan shark when he wanted £100 to buy a car stereo that was on special offer. He agreed to pay back the entire sum several days later, and was charged £20 interest.

Mr Fox, 26, of Stoke-on-Trent, had successfully borrowed money from a loan shark in the past, but on this occasion failed to pay the full amount owed on the due date — so the lender doubled the interest charge.

As the debt mounted, Mr Fox found it increasingly difficult to repay the growing amounts, and missed more payments — ending up being charged £100 interest every day. “Every time I didn’t pay, it cost me more and more,” he said. “There was no way that I could pay this, and the entire loan had reached £1,000. The loan shark said that he would break my legs if I didn’t pay up. This is the kind of thing that happens to people around here.”

Mr Fox, right, turned to A4e, a debt advice agency based in Stoke. Julie Cliffe, a debt adviser at the agency, said: “Mr Fox was on benefits at the time, and we found that there was additional income to which he was entitled.”

He also turned to family and friends to raise the money to repay the loan. “I’d never go to a loan shark again, never, ” he said.

Ms Cliffe said: “The worrying thing here is that the loan shark was not prosecuted and is most probably still trading.”

Where there are illegal loans, there are usually other debts too. “Mr Fox had faced eviction from his council-run accommodation on three occasions, but we have managed to help him,” Ms Cliffe said.

She said it was common to find borrowers who had been threatened with guns and physical violence.

Pressure among vulnerable groups to turn to loan sharks has been exacerbated by the growing difficulty of obtaining mainstream credit from high street banks. Many people have accumulated debts from before the recession, and now find they have few options.

Chris Peel, director of A4e, said: “We’re seeing more people these days. Clients come to us with priority debts such as rent arrears and council tax, but once we scratch the surface we find people have turned to illegal credit to pay off legal borrowings.

“As people’s loans become more complicated, they become less aware of what is legal and what is not, compounding the difficult situation they are in,” he said.