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.