This article is for general information only. It is not financial advice and does not recommend a specific lender or product.

What has changed

UK household energy bills have remained under pressure since the sharp rises of 2021, and costs continue to sit well above pre-crisis levels as of 2026. Ofgem's price cap sets the maximum unit rate that most households on a standard variable tariff can be charged, and that cap has shifted multiple times since it was introduced as a quarterly mechanism in 2022. For the quarter beginning 1 April 2026, Ofgem set the unit rate at 24.50p per kWh and the standing charge at 61p per day for a typical dual-fuel household in England, Scotland, and Wales (source: Ofgem, "Check if energy price cap affects you", updated April 2026). Note: these Q2 2026 figures will be superseded when Ofgem publishes its Q3 2026 cap in July 2026. (CMS review trigger: 90 days from publication.)

Energy debt has also grown alongside elevated bills. Citizens Advice reported that the average energy debt among clients it helped with fuel debt in 2024/25 exceeded £1,500 (source: Citizens Advice, "Energy debt and disconnection", 2025), a figure that has led many households to consider borrowing to clear arrears or fund essential replacements such as a boiler. Supply and installation of a new boiler typically costs approximately £2,500 to £3,500, according to the Energy Saving Trust's boiler guidance.

The FCA's consumer credit sourcebook and affordability guidance has reminded consumers that affordability, not just the monthly payment, should be the starting point when considering any credit product.

Why it matters

There is a gap between what a loan looks like and what it costs. Lenders typically advertise a monthly payment figure, which can make borrowing feel more manageable than it is.

The important bit is the total amount repayable. That is the full amount you pay back over the life of the loan, including all interest and charges. It is the most honest measure of what borrowing will actually cost you.

Who may be affected

Before considering a loan, it is worth checking whether free or non-debt options could help first. The Warm Home Discount, your energy supplier's own payment plan, and the government's ECO4 scheme (which funds insulation and heating upgrades for eligible households) may reduce or remove the need to borrow. Free, impartial debt advice is available from StepChange, National Debtline, and Citizens Advice if you are already in arrears.

This article is worth reading if you are:

  • Considering a personal loan to pay an energy bill, buy a new boiler, or fund home insulation
  • Comparing two loan offers based on their monthly payments
  • Unsure whether a longer loan term is better because the monthly figure looks lower

A simple way to think about it: a longer loan term usually means lower monthly payments, but it also means more months of interest. The total you pay back is often higher.

A worked example (illustrative figures only)

Say you wanted to borrow £1,500 over three years, and the lender's representative APR is 24.9%.

  • Monthly payment: approximately £58
  • Total amount repayable: approximately £2,090
  • That is approximately £590 more than you borrowed

Now say you stretched the same loan to five years at the same rate:

  • Monthly payment: approximately £44
  • Total amount repayable: approximately £2,640
  • That is approximately £1,140 more than you borrowed

The monthly figure dropped by approximately £14, but the extra interest cost almost doubled, rising from approximately £590 to approximately £1,140.

Key takeaway: Stretching to a five-year term reduced the monthly payment by approximately £14, but added approximately £550 in extra interest compared with the three-year loan.

These figures are illustrative. Your actual rate will depend on your credit history, income, and the lender's own assessment. Representative APR means that at least 51% of accepted applicants get that rate or better; many people pay more.

The Bank of England's Bankstats table A5.2 publishes average effective interest rates for personal loans, which can help you judge whether the rate you are offered is in line with the current market.

What to read next

For a fuller explanation of how loan interest works and how to compare the true cost of borrowing, these guides can help:

If you want to run the numbers for your own situation, the loan repayment calculator lets you enter the amount, term, and APR to see both monthly and total costs.

Sources

Related guides