John GreenUK consumers borrowed £1.9 billion in personal credit in February 2026, the highest monthly figure since 2024, as households turn to loans to manage rising costs — and experts warn that many borrowers are paying far more than they need to. With the Bank of England holding its base rate at 3.75% and new FCA rules reshaping the lending landscape, a financial adviser has never been more valuable.
The Numbers Behind the UK Borrowing Surge
Net consumer credit borrowing reached £1.9 billion in February 2026, up from £1.8 billion in January, according to the Bank of England's Money and Credit report. Annual growth in consumer credit hit 8.5% — the fastest pace since 2019.
Personal loans and car finance accounted for £1.2 billion of that February figure, up from £0.9 billion the previous month. The average UK household now carries £5,711 in personal loan debt, an all-time high according to lender data.
Demand for debt consolidation loans has risen 28% in 2026. It is now the primary reason for borrowing among one in four UK consumers considering a personal loan — a clear sign that many households are juggling multiple debts and looking for a way out.
Why Your Income Determines Your Interest Rate
One of the most striking aspects of the current market is the gap in interest rates between high and low earners. Borrowers earning more than £50,000 per year pay an average APR of 13.8%, while those earning under £10,000 face an average APR of 23.7% — a 9.9 percentage point gap, according to Q1 2026 market data.
The average APR on a £10,000 personal loan in Q1 2026 stands at 6.9% for those with excellent credit, but rates climb steeply for borrowers with impaired credit histories or low incomes. The most common loan amount for debt consolidation is £12,822, typically repaid over five years.
For many borrowers, that rate disparity means paying thousands of pounds more over the life of a loan — money that could be avoided with the right advice. A wealth management adviser can review your credit profile, compare products across the market, and help you understand whether borrowing now is the right move given your circumstances.
The BNPL Regulation Shake-Up Coming in July
The lending landscape is about to change significantly. From 15 July 2026, the Financial Conduct Authority will begin formally regulating Buy Now, Pay Later (BNPL) products under the Deferred Payment Credit framework. The FCA issued new directions on 1 April 2026 allowing firms to register for temporary permission from 15 May 2026.
The new rules require BNPL providers to carry out affordability checks before offering credit, present repayment terms more clearly, and give consumers access to the Financial Ombudsman Service if things go wrong. These changes affect millions of UK shoppers who use services like Klarna, Clearpay, and PayPal Pay in 3.
The FCA also introduced targeted support rules on 6 April 2026 as part of its Advice Guidance Boundary Review, enabling more consumers to receive financial guidance on borrowing decisions from authorised firms — without necessarily paying for full regulated advice.
Understanding how FCA-regulated BNPL products affect your overall borrowing picture is increasingly important as these products become part of mainstream consumer credit.
When Should You Consult a Financial Adviser?
The short answer: before you sign anything. But in practice, several situations make professional advice particularly important.
You're consolidating multiple debts. Rolling several loans or credit cards into a single product sounds simple, but the maths can be deceptive. A lower monthly payment does not always mean a lower total cost. A financial adviser can compare the effective total interest payable across multiple scenarios and flag hidden charges or early repayment penalties.
You have a limited credit history or a recent adverse event. Borrowers who have recently been refused credit, or who have a county court judgement (CCJ), often turn to high-cost lenders out of necessity. A specialist adviser can identify regulated alternatives and help you build a route back to mainstream products.
You're borrowing to invest. Using a personal loan to fund a business, purchase property, or invest in assets carries regulatory and tax implications that go well beyond the loan itself. Independent financial advice is strongly recommended before combining loan products with investment decisions.
Your existing rate feels wrong. If you took out a loan two or three years ago when rates were different, you may be eligible to refinance at a materially lower cost. As of Q1 2026, the best headline rates for personal loans stand at 5.4% APR for borrowers with strong credit — a significant saving if you're still paying 10% or above.
What to Do Before Taking a Loan in 2026
Start by pulling your credit report from all three main UK bureaux — Experian, Equifax, and TransUnion — and check for any errors or outdated information. Inaccurate data is one of the leading reasons borrowers receive higher rates than they should.
Next, calculate the total cost of any loan you're considering — not just the monthly repayment. The total amount repayable matters far more than the headline monthly figure, particularly for longer-term loans.
Finally, speak to an FCA-authorised financial adviser, particularly if you are borrowing above £5,000 or consolidating multiple debts. Many advisers offer a free initial consultation, and the cost of advice is typically a fraction of the money that better product selection can save you over the life of a loan.
A qualified wealth management expert can help you map your borrowing against your broader financial picture, ensuring that any loan you take genuinely moves you forward rather than creating new pressure down the line. Find a financial adviser in your area through Expert Zoom to discuss your borrowing options.
This article is for informational purposes only and does not constitute regulated financial advice. Consult an FCA-authorised financial adviser before making any borrowing decisions.
