Daily Junction.mobi portalPersonal Finance · May 23, 2026 · Rachel Stone · 5 min
Before you borrow, check that a lender is FCA-authorised, compare the total cost rather than the headline rate, and be honest about affordability. This checklist walks through what to look for and the questions to ask.
Choosing a lender is not the same as choosing the cheapest loan. The headline rate is only one part of the picture, and the firm behind it matters just as much. A good lender is properly authorised, clear about costs, careful about whether you can afford to repay, and easy to deal with when something goes wrong. This checklist sets out what to look for before you commit. This is general information, not financial or legal advice.
In the UK, almost every firm that lends money to consumers must be authorised by the Financial Conduct Authority (FCA). This is the single most important check, and it comes before price, brand or convenience.
Authorisation means the firm has agreed to follow the FCA's rules: it must treat you fairly, lend responsibly, advertise honestly and handle complaints properly. Borrowing from an unauthorised firm strips away those protections and is a common feature of scams.
You can confirm a firm's status on the FCA Register (register.fca.org.uk) free of charge. Search for the lender by name and check that the phone number, website and email it uses match the details on the Register. Fraudsters sometimes copy the identity of a genuine, authorised firm — a tactic known as a clone — so verifying the contact route is as important as finding the name. Our guide to checking a lender is legitimate covers this in more detail, including the warning signs of loan scams.
Rule of thumb: if a firm is not on the FCA Register, or the contact details do not match, stop. No interest rate is low enough to make up for losing your money to a scam.
Once you know a lender is legitimate, look at what the borrowing actually costs. Adverts tend to lead with a low monthly payment or a tempting representative APR, but neither tells the whole story.
A few terms worth understanding:
A longer term often means smaller monthly payments but a larger total cost, because you pay interest for longer. Here is the kind of comparison worth doing:
| What the advert shows | What to check instead |
|---|---|
| Low monthly payment | Total repayable over the whole term |
| Representative APR | The actual APR you are offered |
| The interest rate | Any arrangement, late or early-repayment fees |
| A long term as "affordable" | How much extra interest the longer term adds |
Ask whether there are fees for setting up the loan, for missing a payment, or for repaying early. Some borrowers benefit from overpaying to clear a loan sooner, but only if the agreement allows it without penalty.
A responsible lender will assess whether you can afford to repay — but you should run your own check first. Affordability is not just whether the monthly payment fits this month; it is whether it will still fit if your circumstances change.
Work through your real budget:
If the numbers only work in a perfect month, the borrowing is probably too much. Lenders are required to carry out proper affordability and creditworthiness checks for your protection, not just their own — a principle explained further in our piece on responsible lending. Building even a small emergency fund first can reduce how much you need to borrow at all.
Two lenders can offer a near-identical rate and be very different to deal with. The quality of the firm shows up most when something goes wrong — a missed payment, a change in your situation, a query you cannot resolve online.
Signs of a lender worth dealing with:
It is also worth reading reviews with a critical eye and checking how the firm communicates. A lender that explains things plainly before you borrow is more likely to be helpful afterwards.
Before you sign anything, run through this:
The best lender for you is rarely just the one with the lowest advertised rate. It is an FCA-authorised firm that is transparent about the total cost, checks that the borrowing is genuinely affordable, treats you fairly, and is easy to reach if you need help. Verify authorisation first, compare the full cost rather than the monthly payment, be honest with yourself about affordability, and never let urgency rush the decision. If anything feels unclear, free help from MoneyHelper or Citizens Advice is a sensible step before you commit.
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