Borrowing guides

This article explains the FCA’s price cap on high-cost short-term credit (HCSTC) – the regulatory category that most payday-style cash advance products fall into in the UK. It is general information, not financial advice.

Where the cap came from

The Financial Conduct Authority (FCA) took over regulation of consumer credit, including payday lending, from the Office of Fair Trading on 1 April 2014. From January 2015 it introduced a formal price cap on high-cost short-term credit, after finding that the previous system allowed costs to spiral in ways that caused serious harm to borrowers, particularly through repeated rollovers and aggressive repeated collection attempts. The cap remains in force and is a core part of how this type of lending is regulated in the UK today.

The three parts of the cap

1. A daily cost cap

Interest and fees on high-cost short-term credit are capped at 0.8% of the amount borrowed per day. This limits how quickly the cost of a loan can build up the longer it takes you to repay.

2. A default fee cap

If you miss a payment, a lender cannot charge more than £15 in default fees, regardless of how much you borrowed. This was specifically designed to stop the flat, disproportionate default charges that used to apply regardless of loan size.

3. A total cost cap

This is the part that matters most in practice: the total amount you can ever be required to pay back – combining interest, fees and default charges – is capped at 100% of the amount you originally borrowed. In plain terms, if you borrow £200, you can never be required to repay more than £400 in total, no matter how long the debt takes to resolve or how many charges accumulate along the way. This is an absolute ceiling, not a target, and it applies for the life of the loan.

What counts as “high-cost short-term credit”

The FCA’s definition is fairly specific: broadly, it covers unsecured credit agreements with an APR of 100% or more where the credit is due to be substantially repaid within 12 months. This is the category most payday-style cash advance products sit in. It’s worth knowing, though, that not every form of short-term or high-cost borrowing falls under this exact definition or gets the identical cap treatment – guarantor loans, logbook (bill of sale) loans, home-collected credit and credit union loans are regulated under different rules within the FCA’s wider Consumer Credit sourcebook, so don’t assume the same three caps automatically apply if you’re comparing a payday-style advance against one of those alternatives. Always check how a specific product is actually regulated rather than assuming from its marketing description.

Limits on rollovers and repeated collection attempts

Alongside the cost cap, FCA rules also restrict how a lender can chase repayment. Lenders are generally limited in how many times they can “roll over” (extend) the same loan, and there are restrictions on repeatedly attempting to take payment from your card or account through a Continuous Payment Authority once an earlier attempt has failed – a lender is expected to make reasonable contact with you about your situation rather than simply repeating automatic withdrawal attempts. If a lender is behaving as though there’s no limit on rollovers or repeated collection attempts, that’s worth raising directly with them, and escalating to the Financial Ombudsman Service if it isn’t resolved.

What the cap doesn’t do

The price cap limits how much a loan can ultimately cost you – it doesn’t guarantee the loan is affordable for you in the first place, and it doesn’t replace a lender’s separate legal duty to carry out proper affordability and creditworthiness checks before lending. A loan can be fully compliant with the cap and still be a bad fit for your circumstances. The cap also doesn’t apply retroactively to older, uncapped debt, and it doesn’t limit non-HCSTC products in the same way, so always check the specific regulatory category and terms of what you’re being offered.

If you think a lender has breached the cap

Breaching the FCA’s price cap is a regulatory breach, not just a contractual dispute. If you believe you’ve been charged beyond what the total cost cap allows, raise a formal complaint with the lender first, then escalate to the Financial Ombudsman Service if it isn’t resolved to your satisfaction – and you can also report the firm to the FCA, which doesn’t resolve individual complaints but does use reports to inform its supervision of the market.

How to check the cap is being applied correctly on a specific loan

If you want to check a specific loan against the cap yourself, work out 0.8% of the amount borrowed and multiply by the number of days the loan has been outstanding to get a rough sense of where interest should stand, then add any default fees (capped at £15 each) and compare the running total against your original amount borrowed – it should never exceed double that amount in total. This is a simplified check rather than a precise legal calculation, since real agreements can have their own specific fee structures, but it’s a useful sanity check if a balance looks like it’s grown further than it reasonably should.

Sources

• Financial Conduct Authority, high-cost credit review and price cap – fca.org.uk/firms/high-cost-credit
• MoneyHelper, payday loans and the price cap – moneyhelper.org.uk
• Financial Ombudsman Service – financial-ombudsman.org.uk
• Citizens Advice, payday loans – citizensadvice.org.uk

A cash advance can feel like the fastest way out of a tight spot. But “fast” and “cheap” are different questions, and the only way to tell what a cash advance will really cost you is to understand APR properly – not the marketing version, the regulatory one. This guide explains what APR actually measures, why short-term borrowing costs can look alarming even when the pound-and-pence cost is modest, and what UK law actually caps.

What APR is actually measuring

Annual Percentage Rate (APR) expresses the total cost of borrowing – interest plus most mandatory fees – as if it ran for a full year, so that different credit products can be compared on a like-for-like basis. That annualising is exactly why short-term products post headline APRs that look extreme: a relatively small pound charge over a short term can still produce a very high annualised APR once it’s stretched out to a 365-day comparison.

This doesn’t mean the percentage is fake or manipulated – it’s a standardised calculation every regulated lender has to use. It does mean that for short-term credit, the APR alone tells you less than it would for a mortgage or a car loan. What actually matters for a cash advance is the total amount you’ll repay in pounds, over the actual term you’re borrowing for.

Representative APR: why the rate you’re quoted may not be your rate

Under the Financial Conduct Authority’s (FCA) rules on financial promotions, a lender advertising a headline APR must use a “representative APR” – the rate at or below which the firm reasonably expects at least 51% of successful applicants to actually be offered. In other words, the advertised rate is a majority threshold, not a personal quote – it’s set so most successful applicants would be offered that rate or better, not a straight average or midpoint. Your own rate depends on your credit history, income and the lender’s own risk assessment, and it can be higher or lower than the number in the advert.

This is a legal requirement, not a courtesy: the FCA Handbook sets it out in detail (CONC 3.5), and the definition of “representative APR” itself is written into the Handbook glossary. If a lender’s advertised rate seems too good relative to what you’re actually offered once you apply, that gap is the representative-APR mechanism at work, not necessarily a bait-and-switch – but it’s still worth comparing the actual offer you receive, not just the advert that brought you there.

What UK law actually caps on short-term credit

Since January 2015, the FCA has enforced a price cap specifically on high-cost short-term credit (the regulatory category that includes traditional payday-style lending). It has three parts:

• Daily cost cap: interest and fees together cannot exceed 0.8% of the amount borrowed per day.
• Default fee cap: if you miss a payment, fixed default fees cannot exceed £15.
• Total cost cap: whatever happens, you can never be required to repay more than 100% of the amount you borrowed in interest and fees combined – in plain terms, you will never pay back more than double what you borrowed, however long it takes.

To make that concrete: at the absolute maximum the law allows, borrowing £200 for 30 days could carry up to £48 in interest and fees (0.8% x 30 days = 24% of £200), taking the total repayable up to £248. That’s the ceiling, not a typical rate – representative APRs and actual charges vary considerably between FCA-authorised lenders, and many sit well under the legal maximum. But knowing where the ceiling is means you can immediately spot a quote that shouldn’t be legal.

Cash advances aren’t all the same product

“Cash advance” covers more than one type of borrowing, and they’re regulated differently:

• High-cost short-term credit (the payday-loan-style product) is subject to the FCA price cap described above.
• Credit card cash advances – withdrawing cash against your card – are ordinary consumer credit, not high-cost short-term credit, so the 0.8%-a-day cap doesn’t apply to them. Card issuers typically charge an upfront cash advance fee (commonly a percentage of the amount withdrawn, or a flat fee, whichever is higher) and interest starts accruing immediately, with no interest-free grace period the way a normal purchase might have.
• Line-of-credit and overdraft-style products have their own separate cost structures again, usually a daily or monthly rate rather than a single price-capped fee.

Because the rules differ, “what’s the APR” isn’t the only question – you also need to know which category of product you’re looking at, since that determines which protections apply.

A short checklist before you compare offers

• Look at the total amount repayable, not just the headline rate or the monthly figure.
• Confirm whether the product is high-cost short-term credit (price-capped) or a different type of credit (not price-capped in the same way).
• For high-cost short-term credit, check that any default fee is £15 or less, and that you’ll never be asked to repay more than double what you borrowed – if a quote breaches either, it isn’t a lawfully compliant FCA product.
• Check the lender’s Financial Services Register status before applying (covered in detail in our guide to spotting predatory lenders).

Once you understand what you’re actually being asked to repay, it’s much easier to compare products properly – our compare options page lists FCA-regulated short-term credit providers side by side so you can see representative APRs and terms together.

Sources: FCA – Price cap on high-cost short-term credit; FCA Handbook CONC 3.5 – Financial promotions about credit agreements not secured on land; FCA Handbook Glossary – representative APR.

We aim to list only lenders authorised by the Financial Conduct Authority (FCA) – that’s a baseline, not a nice-to-have. Authorisation status can change, so before applying with any lender, it’s worth taking a moment to confirm their current status and correct contact details yourself on the FCA Register. Outside that regulated market, illegal lenders (commonly called loan sharks) operate with none of the protections that come with FCA authorisation, and they specifically target people who feel they have no other option. Here’s how to recognise the warning signs and what your rights actually are if you’ve already borrowed from someone unauthorised.

The single most important check: is the lender authorised?

In the UK, a firm has to be authorised by the FCA to lend money legally. You can check any lender, free, in under a minute, using the FCA’s Financial Services Register at register.fca.org.uk – search the firm’s name or its Firm Reference Number (FRN), which should be quoted on their website and paperwork. A genuinely authorised firm will show as “Authorised” along with the specific activities it’s permitted to carry out. If a firm doesn’t appear on the Register at all, or the Register shows a warning against it, treat that as a hard stop. The FCA also warns that some illegal operators falsely claim to be a genuine authorised firm (known as “clone firms”) – so if in doubt, look up the contact details on the Register itself rather than trusting the number on the lender’s own website.

Warning signs that you may be dealing with an illegal lender

• No FCA authorisation – the check above should always be your first move, before anything else on this list.
• No formal paperwork – legitimate lenders are required to give you a clear written credit agreement. An illegal lender typically won’t, leaving you with no documented terms, interest rate or repayment schedule.
• Informal, cash-based arrangements – often operating from a private home or entirely by word of mouth, rather than through a registered business.
• Interest and fees with no stated structure – genuinely extortionate or constantly shifting charges, rather than a fixed rate set out in advance.
• Taking your bank card, benefit card or other valuables as “security” – a regulated lender has no basis to do this.
• Pressure, intimidation or threats if a payment is late – a hallmark of illegal lending that a regulated firm’s own conduct rules and FCA oversight are specifically designed to prevent.

If you’ve already borrowed from an illegal lender

This is the part that surprises most people: if you borrowed from someone who wasn’t FCA-authorised, you haven’t broken the law – they have. Money advice charities are consistent on this point, and it matters because fear of “getting in trouble” is one of the main reasons people stay trapped with a loan shark rather than seeking help. Free, confidential support is available from Citizens Advice and, in England, from the England Illegal Money Lending Team (24-hour helpline 0300 555 2222), which specifically investigates and prosecutes loan sharks and supports their victims – you don’t have to handle it alone or keep paying to avoid consequences that don’t actually apply to you. You can also report an illegal lender via GOV.UK.

Predatory practices that stop short of being illegal

Not every questionable practice comes from an unauthorised lender – some warning signs are worth watching for even with a regulated firm:

• Pressure to borrow more than you asked for, or to take out a second loan to cover a first one.
• Encouragement to roll over or extend a loan repeatedly rather than working out an affordable repayment plan – the FCA’s total cost cap (covered in our guide to the true cost of a cash advance) exists precisely to limit how far this can go for high-cost short-term credit, but it’s still worth being alert to it.
• A lender that doesn’t ask about your income and existing commitments at all – a proper affordability check is a regulatory requirement, not optional due diligence on their part.
• Being taken through the application so quickly there’s no real chance to read the credit agreement before signing.

None of these automatically mean a firm is acting illegally, but they’re reasons to slow down, check the Register, and read the actual agreement rather than the advert.

Compare only regulated options

Every provider on our compare options page is FCA-regulated short-term credit – that’s the starting filter for anything we list. Checking a lender’s status yourself, independently, on the official Register takes a minute and costs nothing, and it’s worth doing even for a firm you found through a comparison site, this one included.

Sources: FCA – How to check a firm or individual is authorised; FCA – Financial Services Register; MoneyHelper – Illegal lending: how to spot a loan shark; Citizens Advice – Loan sharks; England Illegal Money Lending Team – who we are; GOV.UK – Report a loan shark.

Most of us don’t get an “unexpected expense” more than a few times a year – a boiler packing in, a car failing its MOT, a laptop dying right before it’s needed for work. The problem is never really that these costs are unpredictable in general; it’s that any single one is unpredictable in timing. Budgeting for that isn’t about guessing the future, it’s about building a buffer so the timing doesn’t matter as much. Here’s a practical way to do it.

Start with what “emergency” actually means for your budget

The first useful step is deciding, in advance, what counts. A genuine emergency fund is for real emergencies – an urgent home repair, a car breakdown, unexpected travel for a family situation, replacing something essential that’s broken beyond repair. It isn’t for sales, holidays or things you simply want. Setting that boundary before you’re under pressure makes it much easier to actually stick to it when something does come up, rather than negotiating with yourself in the moment.

How much is actually worth aiming for

A commonly used guideline from MoneyHelper (the UK government-backed money guidance service) is to aim for three to six months of essential outgoings held in an instant-access savings account – so if your essential monthly spend (housing, food, utilities, transport, and anything else you genuinely can’t live without) comes to £1,000, that’s a target of roughly £3,000 to £6,000. That figure understandably sounds daunting if you’re starting from zero, and it’s meant as a long-term aim, not a starting requirement. The more immediately useful number is much smaller: even a few hundred pounds set aside is often enough to cover the kind of one-off cost that would otherwise send someone straight to a cash advance.

Build it in small, regular amounts

You don’t need a lump sum to start. MoneyHelper’s own guidance is explicit that it’s better to commit to a smaller, realistic amount you can actually sustain than a larger one you give up on after a month. Some practical starting points:

• Automate a small transfer to a separate savings account on payday, before you see the money in your current account – even £10–£20 a month builds a real buffer over a year.
• If a fixed monthly amount feels impossible, start with loose change or round-ups, then increase it once you see it’s sustainable.
• Keep the fund in an account that’s separate from your everyday spending money, but still reachable within a day or two – instant access, not locked away, so it’s actually usable in a real emergency.

Use a “sinking fund” for costs you can actually predict

Not every irregular cost is a genuine emergency – some are entirely predictable, just not monthly. Car insurance renewals, an annual boiler service, Christmas, back-to-school costs. MoneyHelper describes this approach as a “sinking fund”: working out the likely annual cost of something and setting aside a fixed amount every month so the money is already there when the bill lands, rather than treating a known, recurring cost as a surprise each time. Splitting your buffer this way – a true emergency fund for genuine one-offs, plus sinking funds for foreseeable irregular costs – means fewer things end up competing for the same pot of money.

After you use it, rebuild it

When a real emergency does happen and you dip into the fund, that’s exactly what it’s there for – the point isn’t to avoid ever touching it, it’s to have it available instead of reaching for credit. Once the immediate cost is covered, go back to the same small, regular contributions to rebuild the balance, rather than treating the fund as spent and starting from nothing conceptually.

If you don’t have a buffer yet and something’s come up now

An emergency fund is the right long-term answer, but it doesn’t help with a cost that’s landed this week if you haven’t built one yet. If that’s your situation, it’s worth reading our guide to alternatives to consider before taking a cash advance – some options there (salary advances, credit union loans, interest-free government budgeting support, local council or charitable grants) may cover the gap more cheaply than short-term credit. If borrowing does turn out to be the right choice, understanding what a cash advance actually costs first means you can compare offers properly rather than just taking the first one you’re offered.

Sources: MoneyHelper – How much to save for an emergency; MoneyHelper – Saving money to boost your budget; MoneyHelper – Sinking funds explained.

Comparing cash advance and short-term loan providers is exactly what this site is for – but the cheapest borrowing is often the borrowing you don’t need to do at all. Before you apply for anything, it’s worth spending ten minutes on the options below. None of them work for every situation, but each one is either free, interest-free, or meaningfully cheaper than a short-term cash advance, and checking them first costs you nothing.

Talk to whoever you owe money to, first

If the “unexpected expense” is actually a bill you’re struggling to pay – energy, rent, council tax, a phone contract – contact the provider before it’s overdue. Most utility companies, landlords and local authorities have hardship processes, payment plans or short breathing periods, and it’s almost always cheaper to negotiate directly than to borrow money to pay them on time. This won’t apply if the expense is a genuine one-off (a car repair, an appliance breaking down), but it’s worth ruling out first.

Check whether your employer offers salary advance or earned wage access

Some employers now offer schemes that let staff draw down wages they’ve already earned, ahead of the normal payday, through an app or payroll add-on. It’s worth checking if yours does. A few things are worth knowing before you use one, though: these schemes are typically not regulated by the FCA in the same way as consumer credit, which means you can’t take a complaint to the Financial Ombudsman Service if something goes wrong. You’ll usually pay a fee to access the money, and because you’re drawing on wages you’ve already earned, your actual payday amount will be smaller – so you need to budget for a lighter pay packet, not just for repaying a loan.

Ask about a credit union loan

Credit unions are financial co-operatives, regulated in the UK, that exist specifically to lend to their members at controlled rates – often to people who’d otherwise struggle to get affordable credit from a mainstream bank. By law, credit unions in England, Scotland and Wales cannot charge more than 3% interest per month on a loan (an APR of around 42.6%); in Northern Ireland the legal cap is 1% per month (around 12.68% APR). That’s a statutory ceiling, not a typical rate – many credit unions charge less. You’ll usually need to join (often based on where you live or work) and most carry out an affordability assessment, the same as any responsible lender, but for people who qualify it’s frequently one of the cheapest forms of short-term borrowing available.

If you receive certain benefits: a Budgeting Loan or Budgeting Advance

If you’re on Universal Credit, or on certain legacy benefits such as Income Support, income-based Jobseeker’s Allowance, income-related Employment and Support Allowance or Pension Credit, the UK government offers interest-free help for essential costs – a Budgeting Advance for Universal Credit claimants, or a Budgeting Loan for people on the older benefits. These typically range from £100 to £812, charge no interest at all, and are repaid in small amounts deducted from future benefit payments. You can apply through your Universal Credit journal, a work coach, your local Jobcentre Plus, or by post using form SF500. Eligibility rules apply (including, for Universal Credit, usually having been claiming for at least six months, unless the advance is for certain work-related costs), so it’s worth checking your specific situation before assuming you do or don’t qualify.

Local council and charitable emergency support

Many local councils in England run an emergency welfare scheme for residents facing a sudden financial crisis – support for the current period is delivered mainly through the government-funded Crisis and Resilience Fund, which replaced the previous Local Welfare Provision arrangements from April 2026. Schemes vary by council (some help with essential items or bills directly, some route support through local charities), so check your own council’s website or gov.uk’s guide to cost-of-living help from local councils to see what’s available where you live.

Separately, the charity Turn2us runs a free, anonymous Grants Search tool that checks your circumstances against thousands of UK charitable grants – genuine grants, meaning money that doesn’t need to be repaid, aimed at people struggling to afford essentials. It’s free to use and worth ten minutes if the expense you’re facing is putting real pressure on your budget.

If borrowing turns out to be the right call

None of this is an argument against ever taking a cash advance or short-term loan – sometimes it genuinely is the most practical option, particularly for a one-off, time-limited expense you can clearly afford to repay. If that’s where you land, our compare options page lists FCA-regulated providers side by side, and our guide to understanding the true cost of a cash advance explains exactly what you’ll actually be repaying before you commit.

And if you’re reading this because a previous loan is already becoming hard to manage rather than because of a new expense, it’s worth going straight to our guide on what to do if you’re struggling to repay a short-term loan – there’s free, regulated help available, and the earlier you use it, the more options you’ll have.

Sources: MoneyHelper – Salary advance and Earned Wage Access explained; The Credit Unions (Maximum Interest Rate on Loans) Order 2013, legislation.gov.uk; MoneyHelper – Budgeting Loans and Budgeting Advances; GOV.UK – Budgeting Loans: check if you’re eligible; GOV.UK – Get help with the cost of living from your local council; Turn2us – Find out about applying for grants.

If a cash advance or short-term loan is starting to feel unmanageable, the most important thing to know is that you have real, legally-backed options – and none of them involve simply hoping it resolves itself. This guide covers what to actually do, in order, if repayments are becoming a struggle.

Contact your lender before you miss a payment, not after

FCA-regulated lenders are required to treat customers in financial difficulty fairly, and that includes working with you on a manageable repayment plan rather than just letting missed payments accumulate. If you can see a payment is going to be difficult, contact the lender before the due date if you can – you’re generally in a stronger position asking for help proactively than reacting after a missed payment and default fee have already hit.

Know your right to cancel a continuous payment authority

Many short-term lenders collect repayment through a continuous payment authority (CPA) – essentially, standing permission for them to take money from your debit or credit card. If a CPA is taking money at a time or in an amount that leaves you unable to cover essentials, you have a clear legal right to stop it. You can withdraw your consent to a CPA at any time by contacting your bank or card issuer directly – you don’t have to go through the lender first, and your bank must act on your instruction, up to the close of business on the working day before the payment is due. If a payment is taken after you’ve validly cancelled the authority, you’re entitled to get that money back from your bank. If your bank refuses, you can escalate a complaint to the Financial Ombudsman Service.

Cancelling a CPA stops the automatic collection, but it doesn’t cancel the debt itself – you’ll still owe the money, and you should still contact the lender to agree how you’ll pay it. What it does is give you back control over when and how much comes out of your account.

Breathing Space: a 60-day pause to get advice and a plan

If debts (including a cash advance or short-term loan) are becoming genuinely unmanageable, the government’s Debt Respite Scheme – known as Breathing Space – can give you up to 60 days of legal protection: most interest, fees and charges on qualifying debts are frozen, and most enforcement action and creditor contact is paused, giving you time to get proper debt advice and work out a long-term plan without the pressure escalating in the meantime. Breathing Space is available if you live in England or Wales; Scotland has a separate statutory moratorium system, and Northern Ireland does not currently have an equivalent scheme – a local debt adviser can explain the options available where you live. Breathing Space isn’t a payment holiday – you’re still expected to keep up with ongoing payments where you can – and there’s a review partway through. Crucially, you can’t apply for Breathing Space directly: it has to be arranged through a regulated debt adviser, who registers it on your behalf. It’s a genuinely useful tool, but it’s time-limited, so it works best combined with using the 60 days productively rather than as an end point in itself.

Get free, regulated debt advice

This is the step that makes the others work properly. MoneyHelper (the government-backed money guidance service), Citizens Advice, National Debtline and StepChange all offer free, confidential debt advice in the UK, and any of them can help you register a Breathing Space if you’re in England or Wales (or explain the equivalent option where you live), work out an affordable repayment plan across everything you owe (not just one loan in isolation), and explain formal debt solutions if things have gone further than a single short-term loan. Using free advice doesn’t cost you anything and doesn’t go on any kind of public record just for asking – the only downside to contacting them is not doing it sooner.

What not to do

• Don’t take out a second loan to cover the first one. This is one of the clearest routes into a genuinely difficult debt spiral, and it’s exactly the pattern free debt advisers are trained to help you avoid.
• Don’t ignore contact from your lender. FCA-regulated firms have obligations to treat you fairly if you engage with them; going quiet removes your ability to negotiate and can make the situation harder to unwind later.
• Don’t assume you have no options because the lender is regulated. Being FCA-authorised doesn’t mean a lender can ignore financial hardship – it means the opposite: they’re required to respond to it properly.

If you’re not sure where you stand yet

If you haven’t borrowed yet and you’re trying to work out whether a cash advance is the right call in the first place, it’s worth reading our guides to what a cash advance really costs and alternatives worth checking first. And if something about a lender you’re dealing with doesn’t feel right, our guide to spotting predatory and illegal lending explains exactly what to check and who to contact.

Sources: MoneyHelper – What is Breathing Space and how can it help me; Citizens Advice – Stopping a future payment on your debit or credit card; FCA – FCA reminds banks of their obligations when cancelling Continuous Payment Authorities; Financial Ombudsman Service – Continuous payment authorities.