Loan agreements follow a predictable structure, even when the jargon does not. This starter guide explains each section, from the SECCI form to the default clauses, so you can read before you sign.
Need to know
- Lenders must give you pre-contract credit information before you sign, including the total cost of credit shown as an APR, and those figures should match the final agreement.
- Pre-contract information for distance contracts must state the firm’s reference number, and the signed agreement must name the Financial Conduct Authority as the supervisory authority.
- The agreement sets out repayment dates, the collection method and what happens after a missed payment, so check the late payment charges before you commit.
- You have a right to withdraw from the agreement within a set window and a right to ask your lender in writing for a copy of the signed agreement.
- Disclosure rules are being recast into Financial Conduct Authority rules, but tangible change is unlikely until late 2027 at the earliest.
A loan agreement is a legally binding contract that sets out how much you are borrowing, what it will cost and what both sides must do. Reading it sounds obvious, yet online applications are built for speed and many people sign without opening the document at all. This starter guide walks through the sections in the order they usually appear, from the summary you receive before signing to the clauses that apply if things go wrong. For the mechanics behind the product itself, how payday loans work in the UK covers the basics in plain terms.
The Pre-Contract Credit Information: The SECCI Form
Before you sign, a lender must give you pre-contract credit information, a standardised summary of the proposed loan’s terms. When the agreement is made at a distance, meaning online or by phone rather than face to face, a specific version of this summary applies. The format most people see is known as the SECCI form, short for Standard European Consumer Credit Information, and it comes from the Consumer Credit Directive, the EU law that underpins the disclosure requirements in UK lending rules.
The SECCI form must state the total cost of the credit expressed as an annual percentage rate (APR), which shows the total cost of a loan as a yearly percentage of the amount borrowed. The APR exists so you can compare offers on the same scale instead of juggling different interest and fee structures.
Two details in this paperwork confirm who you are dealing with. Pre-contract information for distance contracts must state the supervisory authority and the firm’s registration number, known as its firm reference number. The signed agreement itself must include a statement that the Financial Conduct Authority (FCA) is the supervisory authority under the Consumer Credit Act 1974. If either statement is missing, stop and check the lender before going further.
One thing is set to change, slowly. The government has confirmed reforms that move most disclosure requirements from the Act into FCA rules, but it expects tangible change no earlier than late 2027. In the meantime, the paperwork you receive follows the familiar format described here.
Remember
The items in the pre-contract summary must be replicated in the contract you sign. If the APR, charges or total repayable in the final document differ from the summary you were shown, do not sign until the difference has been corrected or explained.
The Headline Numbers: Credit, Charges and Total Repayable
The front of the agreement carries the numbers that matter most. Look for four figures: the amount of credit, which is the sum you are borrowing; the interest rate; any charges attached to the agreement; and the total amount repayable, which adds everything together so you can see the full cost in pounds. The APR pulls interest and compulsory charges into one comparable figure, but the total amount repayable is what actually leaves your bank account.
A lender must check that any credit is granted on a sustainable basis, which means assessing whether you are expected to be able to meet the contractual obligations. Affordability checks explains what lenders are required to look at, and why an application that never asks those questions deserves a second look before you go any further. If the headline numbers in the agreement do not match the quote you were shown, ask for the difference in writing before you proceed.
| Part of the paperwork | The question it answers |
|---|---|
| Pre-contract credit information | What will this loan cost, and who is lending? |
| Headline figures | How much am I borrowing and repaying in total? |
| Repayment terms | When and how will the money be collected? |
| Default and termination clauses | What happens if I miss a payment or want to end it early? |
| Signature block | Whose details does the contract record? |
Repayment Terms: Dates, Method and the Payment Authority Clause
This section sets out when each payment is due, how much it will be and how the money will be collected. Most online lenders collect repayments using a continuous payment authority (CPA), an instruction you set up when signing that allows the lender to collect money straight from your debit card on each due date rather than seeking your approval every time. The agreement should state the collection date, the exact amount and what happens after a failed attempt. Our guide to continuous payment authorities explains how these work and how to cancel one if you need to.
Check the dates against your pay dates. A repayment due the day before you are paid is a common way a manageable loan becomes a problem, and the contract will not adjust itself if your wages arrive late or are smaller than expected.
Missing Payments: Arrears, Default Charges and Notices
Miss a payment and you are in arrears, which simply means you are behind on what you agreed to pay. If the debt remains unpaid, the lender may record a default, a formal marker that the agreement has not been honoured. The contract should spell out the charges for late or missed payments and say whether interest continues to build after a failed collection.
The Consumer Credit Act also requires lenders to give notice before taking certain actions, so a formal default notice should arrive before enforcement steps rather than after. Read the agreement’s own description of this process so nothing takes you by surprise. On top of that, the FCA’s rules expect lenders to treat customers who fall into arrears or default with patience and consideration, and to identify customers who begin to show signs of financial difficulty.
Check the section on extending or rolling over the loan too. Extending a short loan again and again is one of the most common routes from a quick fix into debt that lasts for months, and our guide to rollovers and extensions explains why the cost compounds.
Withdrawal, Early Repayment and Your Copy of the Agreement
Signing does not always mean the deal is locked in. The Consumer Credit Act gives borrowers a right to withdraw from a consumer credit agreement within a set period after signing, and the deadline should be stated in your paperwork. If a broker charged a fee and no credit agreement is entered into, the broker must refund any fee of more than £5.
Early repayment is covered as well. The agreement should explain how to settle the loan early and whether a rebate of interest applies; withdrawal, cancellation, termination and early settlement sit among the Act’s key borrower protections.
Your rights continue after signing. Under sections 77, 78 and 79 of the Consumer Credit Act, you can ask your lender in writing for a copy of your credit agreement, and there are time limits that affect how a debt can be recovered. Keep your own copy of everything you sign, because confirming what was agreed is far easier with the paperwork in hand.
Plain-English Checklist Before You Sign
- Compare the pre-contract summary with the final agreement. The APR, charges and total amount repayable should match exactly.
- Find the supervisory authority statement and the firm reference number. If either is absent, verify the lender before handing over any details.
- Read the total amount repayable in pounds, not just the daily or monthly rate.
- Match the collection date to your pay date and confirm the exact amount that will leave your account, including interest and fees.
- Identify the collection method. If a continuous payment authority is used, know how to stop it.
- Note the charges for missed payments, whether interest keeps building and which notices the lender must send.
- Check the withdrawal deadline and the cost of settling early.
- Be honest about affordability. If the repayment would mean cutting back on food, rent or bills, the loan amount itself is the problem, and no clause in the paperwork will fix that.
Print or save the pre-contract summary and read it side by side with the agreement before you sign; if any figure has changed, stop and ask the lender to explain it in writing.
Your questions answered
Q: What is the SECCI form?
A: It is the standardised summary of a proposed loan that a lender must give you before you sign, short for Standard European Consumer Credit Information. It states the total cost of the credit as an annual percentage rate so you can compare offers on the same scale.
Q: What happens if I miss a repayment?
A: You fall into arrears, the contract’s late payment charges can apply and interest may continue to build. A lender should send a formal notice before taking enforcement action, and the rules expect lenders to treat customers in arrears or default with patience and consideration.
Q: Can I get a copy of my agreement after signing?
A: Yes. Under sections 77, 78 and 79 of the Consumer Credit Act 1974, you can ask your lender in writing for a copy of your credit agreement. Keeping your own copy of everything you sign makes any later query much easier to resolve.
Q: Can I cancel the loan after signing?
A: The Consumer Credit Act gives borrowers a right to withdraw from a consumer credit agreement within a set period after signing, and the deadline should be stated in your paperwork. If a broker charged a fee and no agreement is entered into, any fee of more than £5 must be refunded.
This guide is general information, not financial advice. Late repayment can cause you serious money problems. For help, go to moneyhelper.org.uk. We don’t arrange loans or work with lenders. Before borrowing, check the lender is authorised on the FCA register, and consider free debt advice from MoneyHelper, StepChange, National Debtline or Citizens Advice.