Used carefully, borrowing helps you spread the cost of big purchases; used
badly, it can become a trap. Knowing the main options and your rights helps
you borrow safely and cheaply.
The main types of credit
Common options include personal loans,
credit cards, overdrafts, and
Buy Now, Pay Later. Costs vary hugely, so compare the
APR (the yearly cost including interest and fees) and the
total you’ll repay. Buy Now, Pay Later is being brought under FCA regulation
from 15 July 2026, which will add affordability checks and
access to the Financial Ombudsman — but until then, treat it as real debt with
real consequences for missed payments.
Check before you sign
Only borrow from a lender authorised by the
Financial Conduct Authority — you can check the FCA register.
Lenders must assess whether you can afford the repayments, lend responsibly,
and give you clear information. With most credit agreements you also get a
14-day right to withdraw after signing.
Extra protection on credit cards
Pay for something costing between £100 and £30,000 on a credit card and
Section 75 can make the card provider jointly responsible if
it’s faulty or the trader fails — a valuable protection. Our
Section 75 and chargeback
page explains how to claim.
Avoid loan sharks
An unlicensed lender — a “loan shark” — is illegal, however friendly they
seem. Never borrow from one; if you’re being pursued by one, you can report
them safely to the England Illegal Money Lending Team, and you don’t have to
repay an illegal loan.
What to do next
Compare the APR, check the lender on the FCA register, and if repayments are
becoming unmanageable, get free help via our
debt and arrears page.
Sources
FCA (regulating Buy Now Pay Later, from 15 July 2026; consumer credit);
Consumer Credit Act 1974 (Section 75; right to withdraw); Stop Loan Sharks
(England Illegal Money Lending Team). Reviewed: 3 September 2026.