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Consumer Rights When Taking Out a Personal Loan | LegalDocuments.co.uk

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Part ofConsumer Rights

Written by Brad Askew Solicitor (non-practising)
Brad is on the roll of solicitors of England & Wales but does not hold a practising certificate and does not provide legal advice.
Updated June 2026 · England & Wales
Borrowing money through a personal loan is one of the most common financial decisions people make in England and Wales, whether to spread the cost of a large purchase, consolidate existing debts, or handle an unexpected bill. What many borrowers do not realise is how much legal protection sits behind the paperwork they sign. From the Consumer Credit Act 1974 through to the Financial Conduct Authority's rulebook, lenders are bound by strict rules about how they market loans, what they must disclose, and how they treat you if things go wrong. This guide walks through the rights you hold as a borrower, the common problems that crop up with personal loan agreements, and the practical steps you can take if you believe a lender has treated you unfairly. Knowing where you stand before signing, or before raising a complaint, puts you in a far stronger position.

Overview

A personal loan agreement is a regulated credit contract between you and a lender, usually a bank, building society, or authorised finance provider. You receive a lump sum up front and agree to repay it over a fixed period, typically with interest added, through regular instalments.

Most personal loans in England and Wales fall under the Consumer Credit Act 1974 and are regulated by the Financial Conduct Authority (FCA), which means lenders must follow detailed conduct rules set out in the FCA's Consumer Credit sourcebook (CONC). Your rights under these rules cover a wide range of situations.

Before you sign, you are entitled to clear pre-contract information so you can compare products and understand the true cost of borrowing. After signing, you have a 14-day right to withdraw from most regulated credit agreements without giving a reason.

Throughout the life of the loan, the lender must treat you fairly, respond properly to complaints, and show forbearance if you fall into genuine financial difficulty. If a term in the contract is unfair within the meaning of the Consumer Rights Act 2015, it may not be binding on you at all.

Key steps

  1. Read the pre-contract information carefully. Before you sign anything, the lender must give you a Standard European Consumer Credit Information (SECCI) document or equivalent. Check the total amount repayable, the APR, the length of the loan, any fees, and what happens if you pay late or early. If something is unclear, ask in writing before committing.
  2. Use your 14-day right to withdraw if you change your mind. For most regulated personal loans, you have 14 days from the day after the agreement is made (or from when you receive a copy of the signed agreement) to withdraw. You must repay the capital drawn plus any interest accrued for the days you held the money, but no penalty applies.
  3. Keep full records of every communication with the lender. Save copies of the credit agreement, statements, emails, letters, and notes of phone calls including dates and the name of the person you spoke to. If a dispute arises later, contemporaneous records are often the single strongest piece of evidence you can bring to a complaint or an ombudsman referral.
  4. Raise a formal complaint with the lender first. If you believe you have been mis-sold the loan, charged unfair fees, or treated poorly, put your complaint in writing and ask the lender to follow its internal complaints procedure. FCA-authorised firms generally have up to eight weeks to issue a final response, and you cannot usually escalate further until that deadline has passed or a final response is received.
  5. Escalate to the Financial Ombudsman Service if needed. If the lender rejects your complaint or fails to respond within the time limit, you can refer the matter to the Financial Ombudsman Service free of charge. The Ombudsman can direct the lender to put things right, including refunding charges, adjusting the balance, or paying compensation for distress and inconvenience.

Common questions

If you're dealing with this kind of situation, a call with an experienced legal adviser can help you work out the right next step — from £89.

Common questions

Q Can I cancel a personal loan after I have signed the agreement?
In most cases, yes. Regulated personal loan agreements carry a 14-day withdrawal right under the Consumer Credit Act 1974. You notify the lender, repay the capital you drew down, and pay interest only for the days you held the funds. No penalty or additional charge should apply. The right does not extend to every form of credit, so check the agreement wording and act quickly within the 14-day window.
Q What counts as an unfair term in a loan agreement?
Under the Consumer Rights Act 2015, a term is unfair if it causes a significant imbalance between the parties to your detriment, contrary to good faith. Examples can include clauses letting the lender change key terms without notice, disproportionate default charges, or one-sided dispute rules. Core price terms expressed transparently are usually excluded. If a term is found unfair, it is generally not binding, though the rest of the contract may continue.
Q Do I have to pay early repayment charges if I clear the loan early?
The Consumer Credit Act allows partial or full early settlement of regulated loans, and the lender must calculate a rebate of interest you would otherwise have paid. A limited early settlement charge is permitted in some circumstances, but it is capped by regulation. Ask the lender for a settlement figure in writing and check it carefully. If the charge looks excessive, you can challenge it through the lender's complaints process.
Q What should I do if I am struggling to make repayments?
Contact the lender as soon as possible. FCA rules require regulated lenders to treat customers in financial difficulty fairly, which can include freezing interest, accepting reduced payments, or agreeing a payment plan. Free debt help is also available from charities such as StepChange, National Debtline and Citizens Advice. Ignoring the problem typically makes it worse, as missed payments are reported to credit reference agencies and may lead to default.
Q Can a lender change the interest rate during my loan?
Fixed-rate personal loans usually cannot be varied, and the rate shown in the agreement applies throughout the term. Variable-rate products can change, but the lender must follow the conditions set out in the agreement and give proper notice. Any variation must be fair and transparent under the Consumer Rights Act 2015. If the rate has moved and you believe the change was not properly made, you can raise a complaint.
Q What is mis-selling and how do I know if it happened to me?
Mis-selling can arise where a lender recommends or arranges a loan that was unsuitable, fails to explain key features, applies pressure, or hides material information such as add-on insurance or significant fees. You may have grounds to complain if the product did not match your stated needs or affordability was not properly assessed. The lender must investigate, and if you are unhappy with the response you can escalate to the Financial Ombudsman Service.
Q Is the Financial Ombudsman Service free to use?
Yes. The Financial Ombudsman Service is free for consumers. You can refer a complaint once the lender has issued a final response or once eight weeks have passed since you complained, whichever comes first. There are time limits, generally six years from the event or three years from when you knew you had cause to complain. The Ombudsman's decision is binding on the lender if you accept it.
If you're dealing with this kind of situation, a call with an experienced legal adviser can help you work out the right next step — from £89.

Sources

This guide is based on primary UK law and official guidance.

Brad Askew, Solicitor (non-practising)

Written & reviewed by

Brad Askew Solicitor (non-practising)

Brad is on the roll of solicitors of England & Wales but does not hold a practising certificate and does not provide legal advice. LegalDocuments.co.uk is not a law firm and does not provide regulated legal advice.

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Legal disclaimer
This article is for general information only. It is a tool to help you find your way — not legal advice, and not a substitute for speaking to a qualified adviser about your situation.