In this brief guide we are going to answer the question “can you return a personal loan” and give you more information on how to go about getting a personal loan so you have no need to return one in the future.

Can you return a personal loan?

Yes, you can return a personal loan within the first 14 days of the contractual start date of your loan agreement with no costs whatsoever(except there was an application fee). In the UK and in most western countries, financial agreements have a 14-day cooling-off period wherein the borrower can walk away from the agreement at no cost to them.

The 14-day cooling-off period is written in law under the consumer credit act and will allow you to return the personal loan within those 14 days and the 14 days will begin from when you receive a copy of the personal loan agreement or the date the personal loan agreement is signed, whichever is later.

When you return your personal loan you will have 30 days from when you cancel your personal loan to return the money.

You can only be charged interest for the period you had the credit and any additional fees you may have been charged will have to be refunded.

To return a personal loan you must inform the lender (known as the notice of withdrawal) verbally or in writing.

We suggest you do it in writing, if possible.

Personal loans are not the only credit you can cancel within the 14-day cooling-off period under the consumer credit act.

You can also cancel the below:

  • credit cards
  • payday loans
  • hire purchase
  • catalogues
  • store cards
  • store finance and ‘buy now pay later’ agreements

Why you may want to return a personal loan

Below are some of the most common reasons why you may want to return a personal loan.

  • You no longer need the personal loan
  • You found a cheaper loan

You no longer need the personal loan

You may no longer need the personal loan for whatever reason.

If this is you then that’s fine. The good news is that you do not need to explain your reasons for returning the loan to the personal loan lender.

You can simply contact the lender and begin the process of returning the loan.

You found a cheaper loan

If you have found a cheaper loan you may want to return a personal loan that you just took out.

The good news is that you can simply do this by contacting the lender as long as you are still within the 14-day cooling-off period.

You should however be mindful that you are preapproved for the new cheaper loan which you seem to have found or even better, you have already applied and been accepted.

Without this, you risk returning the current personal loan you have and then not being able to get a new one.

The likelihood of you getting a new personal loan within the next few weeks is also much less due to the fact that when you applied for the first personal loan (which you are now about to return) the lender will have carried out a hard credit search on your credit file to determine your affordability for the loan.

This hard search leaves a pubic mark on your credit file and sometimes reduces your credit score by a few points.

Most lenders will typically reject people who have had hard credit searches on their credit files within a particular timeline e.g 4 weeks and so you may find it harder to get a new personal loan.

If you have any issues returning the personal loan or you are charged a fee that you feel you should not have been charged then you should report this to the regulator.

In the UK, the FCA oversees lending but the specific body which deals with consumer complaints in regards to retail lending is the Financial Ombudsman and you can contact them on the details below.

The Financial Ombudsman Service

Exchange Tower

London

E14 9SR

Telephone: 0800 0 234 567 or 0300 123 9 123

Email: [email protected]

What if you want to return a personal loan that is beyond the 14-day cooling-off period?

If you want to return a personal loan that is beyond the 14-day cooling-off period then this is also possible but to do so you may need to pay the loan balance in full.

To return a personal loan you will need to contact the lender and obtain a settlement figure which is valid for 28 days.

A settlement figure is an amount the lender will accept to settle and cancel the loan in full.

The way settlement figures are calculated is dictated by the financial regulator and so this is not a system that the lender can use to their advantage.

The settlement figure will usually include the full capital owed and any interest accrued and owed up until that date.

To return the personal loan in this case, you will need to pay off the settlement figure within those 28 days if not you will need to get a new settlement figure.

When you return a personal loan outside of the 14-day cooling-off period you will not be due back any fees you paid when you initially took out the personal loan.

Steps for applying for a personal loan

To avoid having to return a personal loan, you can follow these steps when applying for a personal loan.

  • Identify exactly how much you need (+ a contingency amount)
  • Get your income and tax documents ready
  • Use an eligibility checker

Identify exactly how much you need (+ a contingency amount)

Before you apply for a personal loan you should work out exactly how much you need and if a contingency percentile is also needed.

Once you have worked this out and you are certain you have got your numbers right, you can then move on to the next step.

Get your income and tax documents ready

Most personal loan lenders don’t ask for your income and tax documents but if you feel the need to be extra prepared or if you are applying for a large sum then you should gather your income and tax documents in case the lender asks for them. 

Use an eligibility checker

The final step in getting a personal loan is to ensure you use a personal loan eligibility checker which will scan the market to find you the best personal loan rates and in most cases show you which personal loans you are pre-approved for.

Be sure to inquire on how many lenders the eligibility checker has on their panel before checking with them.

Most eligibility checkers work by doing a soft credit check to pull your credit details and match them up with the lender’s scorecard or criteria and then determine if the lender will be willing to lend to you.

Soft credit checks are not visible to the public.

In this brief guide we answered the question “can you return a personal loan” and gave you more information on how to go about getting a personal loan so you have no need to return one in the future.

John has 22 years of experience in financial services. This spans across financial research, financial services (As a qualified mortgage broker and underwriter), financial trading and sales at global investment banks. While working as a publishing research analyst, he covered European bank credit and advised institutional clients on investment strategies at both JP Morgan and Societe Generale. John has passed all three levels of the CFA (Chartered Financial Analyst) programme.

John has 22 years of experience in financial services. This spans across financial research, financial services (As a qualified mortgage broker and underwriter), financial trading and sales at global investment banks. While working as a publishing research analyst, he covered European bank credit and advised institutional clients on investment strategies at both JP Morgan and Societe Generale. John has passed all three levels of the CFA (Chartered Financial Analyst) programme.