Risks and warning signs
Borrowing rarely goes wrong all at once. It drifts. These are the patterns worth recognising early, when there's most room to do something about them.
A few patterns turn borrowing into a problem
None of them is a verdict on you. Each is a sign that borrowing has started to get out of control.
Seven signs worth noticing
- Borrowing to make the payments on other borrowing.
- Using credit for food, rent or bills, month after month.
- Paying only the minimum on a card, month after month.
- Being in your overdraft all month, every month.
- Several pay-later plans running at once, and not being sure of the total.
- Missing a payment, or paying late.
- Not opening the letters, or not wanting to know the balance.
Recognising one isn't a crisis. If you recognise multiple then you need to review your options before things get worse.
Plenty of people tick one for a month and it passes. It's when one becomes how things normally are that the cost starts to build, and that's the moment it's worth looking at properly.
Borrowing to repay borrowing moves the debt. It doesn't shrink it
And it often moves it somewhere dearer.
When one card or loan is used to make the payments on another, the total you owe doesn't go down. New interest starts on the new borrowing, on top of what's still running on the old. If the new borrowing is the short-term kind, it charges more per pound than what it's paying off.
Moving a balance onto a 0% card is the version people have in mind when they say this can work. It costs nothing in interest only while the deal lasts, and Interest, and what APR actually means says what happens to anything left when it ends.
The minimum payment keeps you up to date. It isn't built to clear the debt
On a card, most of the minimum goes on interest.
Pay only the minimum on £1,000 at 25% APR and after a year you still owe £886, having paid £213 in interest along the way. Interest, and what APR actually means has the working.
If, over 18 months, you've paid more in interest and charges than you've paid off the balance, the regulator calls it persistent debt, and the card company is required to get in touch. That letter is a warning sign arriving in writing.
Missing a payment costs more than the payment
A late fee, a mark on your credit file for up to six years, and after several, a default.
Miss a payment and the lender can charge a fee. The missed payment goes on your credit file and stays there for up to six years. Miss several and the lender can record a default, which also stays for up to six years, and can pass the debt to a collection company or take you to court.
The reassuring part is true too. Talking to your lender before a payment is missed doesn't affect your credit file, and lenders are expected to help someone who's struggling. If it's getting on top of you says what that help can look like.
The dearest legal borrowing has a legal ceiling
A high-cost short-term loan can charge up to 0.8% a day, but never more than you borrowed, on top.
These are the loans of a few hundred pounds, repaid within weeks or months. On £300, the daily cap works out at £2.40 a day, so £72 over a month. However long it runs, the interest and fees together can never pass £300, and a default fee can't be more than £15.
The cap limits the cost of one loan. It doesn't limit the pattern. Taking a new one to cover the last is the first warning sign on this page, at the highest price on this site.
Show me the working
The daily cap: £300 × 0.8% = £2.40 a day
Over 30 days: £2.40 × 30 = £72.00
The total cap: interest and fees can never be more than 100% of what you borrowed, so on £300 the most you can be charged on top is £300
Lending without permission is a crime, and loan sharks do it
Lending as a business without the regulator's permission is illegal. If you've borrowed from one, it's the lender who has broken the law, not you.
The signs Citizens Advice lists:
- Interest that's extremely high, and a total that keeps growing.
- Little or no paperwork.
- Taking your bank card, your ID or something valuable until you've paid.
- Threats, or violence.
- Lending like a business, to lots of people, often from home.
Any legal lender can be found on the FCA Firm Checker. In England, the Illegal Money Lending Team takes reports in confidence, on 0300 555 2222, 24 hours a day. If anyone threatens you, that's a matter for the police straight away.
Spotting a sign early is the useful part
Every pattern on this page has a way back, and free help with it.
None of these is a dead end. The earlier one is looked at, the more room there is to change it. If it's getting on top of you has where to start, and it's free.
Credit file rules from MoneyHelper; the price cap from the FCA; persistent debt from the FCA Handbook; the signs of a loan shark from Citizens Advice; the Illegal Money Lending Team's number from its own website. Facts last checked October 2026. I check them every month, to catch rates and rules that change.