Your Rights and Responsibilities When Borrowing Money in the UK
Published 20th of February 2016·Updated 17 April 2026
Reviewed by: Reviewed for accuracy April 2026
When you borrow money in the UK through a personal loan, credit card or overdraft, the Consumer Credit Act 1974 gives you a set of legal rights that lenders must respect. These include the right to a 14-day cooling-off period, the right to settle early and the right to receive a clear statement of the full cost of credit before you sign.
Short Summary
The Consumer Credit Act 1974 covers most forms of personal credit in the UK, including personal loans, credit cards and hire purchase agreements. Mortgages are regulated separately under the Financial Conduct Authority's Mortgage Conduct of Business rules.
Any lender offering regulated credit must be authorised by the Financial Conduct Authority (FCA). You can check whether a lender is FCA-authorised on the FCA register at register.fca.org.uk before signing any agreement.
Borrowing from an unauthorised lender - commonly called a loan shark - removes your legal protections entirely. If you are being pressured by an illegal lender, contact the Illegal Money Lending Team on 0300 555 2222 (England).
Your key responsibility as a borrower is to make repayments on time and in full. If your circumstances change and you cannot meet payments, contact the lender early. Lenders are required by the FCA to treat customers in financial difficulty fairly.
What must a lender tell you before you sign?
Under a regulated agreement, the lender must clearly state: the type of agreement, the amount of credit, the APR (Annual Percentage Rate), the total amount repayable, the monthly repayment amount, and any fees or charges. This information must be provided in a Pre-Contract Credit Information document (also called a SECCI - Standard European Consumer Credit Information form) before you commit.
If you are not given this information before signing, the agreement may be unenforceable. The FCA requires lenders to conduct an affordability assessment and retain evidence that they did so.
What is a regulated credit agreement?
A regulated agreement is any consumer credit contract covered by the Consumer Credit Act 1974. This includes unsecured personal loans, credit cards, overdrafts, hire purchase agreements and conditional sale agreements. The lender must specify clearly which type of agreement you are entering. A regulated agreement entitles you to specific protections including the right to cancel within 14 days.
Not all credit is regulated. Mortgages, credit union loans, employer loans and some business credit fall outside the Consumer Credit Act. Check the paperwork carefully if you are unsure.
What is the 14-day cooling-off period?
You have the right to cancel any regulated credit agreement within 14 calendar days of signing it, without giving a reason. This is sometimes called the "withdrawal right". If you withdraw, you must repay any money already borrowed, plus interest accrued for the days you held it. No other fees or charges apply.
The 14-day right does not apply to: mortgages, overdrafts repayable on demand, agreements for credit below £50, and some other specific categories. Check the terms of your agreement to confirm whether the right applies.
Can you pay off a loan early?
Yes. Under the Consumer Credit Act, you have the statutory right to settle a loan early at any time. Contact the lender and ask for a settlement figure, which must be valid for at least 28 days. The settlement figure should reflect any interest rebate you are entitled to for the remaining term. Some lenders charge an early repayment charge (ERC), typically equivalent to one to two months' interest - this is permitted, but the charge must be disclosed in the original agreement.
You are not obliged to settle after requesting the figure; you can change your mind and continue with the original repayment schedule.
What happens if you fall behind on repayments?
If you miss a payment, the lender will typically charge a late payment fee and register a missed payment on your credit file. If you continue to miss payments, the lender can issue a default notice under the Consumer Credit Act, which gives you 14 days to bring the account up to date. Failure to do so allows the lender to terminate the agreement, demand the full outstanding balance and pursue recovery through the courts.
Contact the lender before missing a payment if you anticipate difficulty. The FCA's Consumer Duty (in force from July 2023) requires lenders to treat customers in financial difficulty with forbearance and to offer appropriate support. Free debt advice is available from StepChange (stepchange.org) and Citizens Advice (citizensadvice.org.uk).
| Right | When it applies | Key detail |
|---|---|---|
| 14-day cancellation | Regulated agreements | Must repay funds plus accrued interest |
| Early settlement | All regulated credit | Lender may charge up to 2 months' interest as ERC |
| Copy of agreement | At point of signing | Lender must provide a copy |
| Settlement figure | On request | Valid for minimum 28 days |
| Forbearance | If in financial difficulty | Lender must consider payment plans under FCA rules |
What protection do you have with secured loans?
If you take out a loan secured against your home - including a second charge mortgage or secured personal loan - you are giving the lender the right to repossess your property if you default. The lender must follow a legal process (including issuing a default notice and obtaining a court order) before repossession can occur. Courts will consider whether the lender has offered reasonable alternative arrangements before granting a repossession order.
Mortgages are regulated under the FCA's Mortgage Conduct of Business (MCOB) rules rather than the Consumer Credit Act, but the practical protections around default and repossession are similar.
Frequently Asked Questions
What should I do if I think my lender has treated me unfairly?
First, raise a formal complaint directly with the lender. They must acknowledge your complaint within five business days and provide a final response within eight weeks. If you are not satisfied with the response, you can escalate to the Financial Ombudsman Service (FOS) free of charge. The FOS has the power to award compensation and require lenders to change their behaviour.
Are payday loans covered by the Consumer Credit Act?
Yes. Short-term high-cost credit products - commonly called payday loans - are regulated under the Consumer Credit Act and additionally subject to specific FCA rules, including a cap on total costs (interest plus fees cannot exceed 100 per cent of the amount borrowed). The FCA authorises lenders offering these products. Check any lender's FCA registration before borrowing.
What is a county court judgement (CCJ) and how does it happen?
A CCJ is a court order registered against you when a creditor obtains a legal judgement that you owe them money. The lender must follow a formal process including issuing a Letter of Claim before applying to the court. A CCJ stays on your credit file for six years and significantly affects your ability to borrow. If you receive a Letter of Claim, seek free debt advice from Citizens Advice or StepChange immediately.
Can a lender change the interest rate on my loan?
For fixed-rate loans, no - the rate is fixed for the term of the agreement. For variable-rate products such as credit cards and some overdrafts, the lender can change the rate but must give you a minimum of 30 days' written notice. You have the right to repay the outstanding balance at the existing rate within 60 days if you do not accept the new rate.
What is the difference between a debt management plan and a loan?
A debt management plan (DMP) is not a loan. It is an informal arrangement (often facilitated by a debt charity such as StepChange) where you make a single monthly payment that is distributed among your creditors. Your existing debts remain in place; they are not consolidated into new borrowing. A DMP does not give you any new money; it restructures how you repay existing debt.