Changing Your Mind or Paying Early: Your Rights With a Personal Loan
The Consumer Credit Act gives borrowers two useful rights: a short window to back out of a loan, and the right to pay it off early.
What to know
- For most personal loans, you can withdraw within 14 days without giving a reason.
- If you withdraw, you repay the money borrowed plus interest for the days you had it, within 30 days.
- You can repay all or part of a regulated loan early at any time.
- Early settlement charges are capped, and none can be claimed if you repay £8,000 or less in a 12-month period.
Most UK personal loans are regulated by the Consumer Credit Act 1974. Two of its protections are especially useful: the right to change your mind shortly after taking a loan, and the right to repay early.
The 14-day right to withdraw
For most regulated credit agreements, you can withdraw within 14 days without giving a reason. The period usually starts the day after the agreement is made, or the day after you receive your copy of it, if that’s later.
To withdraw:
- Tell the lender, in writing or by phone if it allows.
- Repay the money borrowed, plus interest for the days you had it, within 30 days of telling the lender.
The right doesn’t apply to agreements secured on land, such as mortgages and homeowner loans.
Paying off a loan early
You can repay all or part of a regulated loan early at any time. Ask your lender for a settlement figure, which shows what you’d need to pay to clear the loan on a given date. Repaying early saves the interest you’d otherwise have paid for the rest of the term.
Early settlement charges
For loans with a fixed rate, the lender may claim compensation for repaying early, but the law limits it:
- No charge if you repay £8,000 or less in any 12-month period.
- No more than 1% of the amount repaid early if more than a year of the loan remains.
- No more than 0.5% if a year or less remains.
- Never more than the interest you’d have paid between the repayment and the original end date.
| Example | Time left | Maximum charge |
|---|---|---|
| Repay £6,000 in a year | Any | £0, under the £8,000 threshold |
| Repay £10,000 | Two years | £100 (1%) |
| Repay £10,000 | Eight months | £50 (0.5%) |
These limits apply to agreements made from 1 February 2011. Older agreements can use a different calculation, so check your paperwork.
Handy tip
Ask for the settlement figure in writing and note the date it’s valid until. If you’re paying from savings, check you’ll still have an emergency fund afterwards.
Good to know
The limits above don’t apply to agreements secured on land or to overdrafts. Mortgages have their own early repayment charges, set out in the mortgage offer.
Using these rights in practice
If you’ve taken a loan and found a better option within two weeks, withdrawing may cost you only a few days’ interest. If you come into money later, settling early, or overpaying part of the balance, can cut the total cost. Before borrowing again, our guide to representative APR explains how to compare offers, and our guide to debt consolidation covers when combining debts makes sense.
Your questions
Does the 14-day right apply to mortgages?
No. The right to withdraw under the Consumer Credit Act doesn’t apply to agreements secured on land, such as mortgages and secured loans.
How do I get a settlement figure?
Ask your lender in writing. The figure shows what you’d need to pay to clear the loan on a given date.
Can I make a partial early repayment?
Yes. You can usually choose whether it shortens the term or lowers your monthly payments, so check with your lender.
This guide explains how UK borrowing works in general terms and isn’t financial advice. Rates, rules and lender criteria change, so check the details with the lender, GOV.UK or the Financial Conduct Authority before you decide. For advice on your own circumstances, speak to an FCA-authorised mortgage or financial adviser. If you borrow against your home, it may be repossessed if you do not keep up repayments.
