Website of the UK government

Ways of borrowing money and your rights

If you want to borrow money, lenders will look at your income and credit history to decide if you can afford the loan (see link below).

When you sign a credit agreement, the law gives you the following rights:

• all lenders should give you clear information about the credit agreement and must explain this information to you before you sign up
• you must get a copy of the credit agreement – if you don't, the lender may need to go to court to make you pay back the loan
• you can cancel the agreement within 14 days of signing up
• you can save money by paying back all or part of the loan early – ask the lender for a ‘settlement statement’
• you must be given information if things change, eg if the interest rate changes
• you must get written notices from the lender about missed payments before they can take you to court

You have these rights with:

• credit cards and store cards
• personal loans – when you borrow money from a bank or other lender, eg to pay for a car (different rules apply to mortgages)
• 'credit sale' – the trader provides the goods and finance, eg you buy a bed from a store and pay in monthly instalments
• hire purchase or conditional sale loans – you don't own the goods until you've paid off the loan in full

• How lenders decide who to lend to (money, tax and benefits section)

• Hire purchase - your rights

Information you must get before you sign a credit agreement

Before you sign up to a credit agreement, all lenders should give you 'pre-contract information' and explain this to you. This must include information such as:

• how much money you can borrow and how much this will cost
• how and when you have to make repayments
• what happens if you miss a payment or are late paying
• the interest rate and any charges, eg administration fees

If you don't get this information, the lender may need to go to court to make you pay back the loan.

Cancelling a credit agreement

You have 14 days to cancel your credit agreement, starting on the day:

• you receive a copy of your credit agreement
• you get a credit limit for the credit card

To cancel, tell your lender you want to ‘withdraw’ from the agreement.

If you withdraw from the agreement, you have to repay any money that you've already received plus interest for each day you had the credit.

You still have to pay for any goods or services you bought with the credit – unless you have separate rights to cancel these because you bought:

• online
• over the phone
• by mail order
• on your doorstep (eg when a salesperson visits your home)

If your credit agreement doesn't have a fixed end date, eg for credit cards, you can end the agreement at any time. You will need to give one month's notice and pay back what you owe.

• Get advice about your right to cancel from Consumer Direct

• Buying on your doorstep - your consumer rights

• Internet, mail order and telephone shopping

Getting copies of your agreement

If you lose your credit agreement paperwork, write to your lender to ask for a copy and pay a £1 fee. The lender then has 12 days to send you a copy of your agreement and a statement of what you owe.

Until the lender gives you this information, they can't take you to court to make you pay back the money you owe. But the debt isn't cancelled – if you don't keep up with repayments, you may find it difficult to get credit again.

Your rights if you can’t pay back your loan

If you keep missing payments, your lender may want to:

• cancel your credit agreement
• ask you to pay back the loan in full
• take court action to get the money you owe

Before a lender can do this, they must send you:

• an arrears notice with details of how much you owe and advice on where you can get help with your debt
• a default notice that explains what will happen if you don't repay the money within a set time
• a written notice if they want to add on charges like interest

If a lender tries to take action without sending you these notices, you should get legal advice.

• Help with your debts (money, tax and benefits section)

• Where to get legal advice (crime and justice section)

• Get advice from Consumer Direct

Complaining about a credit agreement

If you have a complaint about a credit agreement, contact your lender first.

If you can't sort out the problem with your lender, you can complain to the Financial Ombudsman Service (FOS).

You will need to give the lender eight weeks to sort out your problem before you complain to the FOS.

• How to complain about goods bought on credit

• Make a complaint to the Financial Ombudsman Opens new window

More useful links

• Options if you’ve been refused a loan or credit (money, tax and benefits section)

• Different ways of borrowing money (money, tax and benefits section)

• Dealing with loan sharks (money, tax and benefits section)

• Buying on credit: pros and cons (money, tax and benefits section)

• Unfair terms in contracts