Arrangement fees, admin charges, optional insurance — know exactly what you must pay and what you can decline before you sign anything.
5 min read • Cash Train editorial team
Every loan has a cost. But the fees attached to that cost fall into two completely distinct categories — and confusing them is one of the most common mistakes borrowers make.
UK consumer credit law — principally the Consumer Credit Act 1974 and FCA CONC sourcebook — requires lenders to be clear about both types and prohibits bundling optional products into the headline rate.
These charges are a condition of the credit. Because they are mandatory, the law requires them to be factored into the APR figure shown in any advertisement or pre-contract information. The most common examples are:
Key rule: If a fee is mandatory, it must appear in the credit agreement you sign and must be reflected in the APR. If a lender charges a mandatory fee that is not in the agreement, you can challenge it under the CCA 1974.
These products are sold alongside loans but are not conditions of borrowing. You can say no without affecting your approval or your interest rate. Common examples in UK consumer lending include:
A flat arrangement fee can look small in isolation. Seeing it as a percentage of the loan amount — and reflected in the total repayable — makes its real cost clear. The figures below are indicative and subject to status and affordability.
The second scenario illustrates why a mandatory fee that is not included in the APR is a red flag. Under UK consumer credit rules, that charge should either be in the APR or disclosed separately as a distinct, optional purchase. If it appears nowhere in your credit agreement, the lender has no contractual right to collect it.
Representative example: borrow £500 over 6 months at 49.9% APR (fixed). Monthly repayment £95.21. Total repayable £571.26. Rates from 39.9% APR (Plus) to 149.9% APR (Quick). Available on loans £100–£5,000. Subject to status and affordability.
Default charges are neither mandatory nor optional in the normal sense — they are contingent. They only apply if something goes wrong with your repayment. UK rules require them to be:
Common default charges in UK personal lending include a missed payment fee (typically £15–£25) and a returned direct debit fee. If a lender charges more than the stated amount in your agreement, or applies a charge not listed in the agreement, you can raise a formal dispute.
If you are struggling to keep up with repayments, contact your lender before a payment is missed — most will have a hardship process that can pause or restructure charges before default fees are triggered.
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