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Finding the best 12 month loan for you

By Matt Fernell, Editor-in-Chief at Finance.co.uk.

Matt Fernell

Borrowing money over a short period of time, like 12 months, is a popular option. Here’s how to find a one-year loan that works for you.

Why find a 12 month loan with Finance.co.uk

Our partners, Loans Warehouse, can check your eligibility with a range of top lenders in minutes - without affecting your credit score.

  • Poor credit history accepted

  • Loans available from £1,000

  • Get a decision in minutes

  • Quotes tailored to your situation

  • Compare quotes from a range of trusted lenders

How to choose the right 12 month loan

Follow these simple steps to find one year loans that are ideal for your needs:

  1. Work out exactly how much you need - every extra penny you borrow will need to be repaid with interest

  2. Let us know your details - to find you the right quotes, we need to know about the loan you want and some personal information

  3. Compare quotes - we’ll find you quotes from trusted lenders so you can choose the deal that works best for you

  4. Make sure you can afford it - Only apply for a loan if you’re confident you can make the 12 monthly repayments you’re quoted

Find out more about getting a 12 month loan here

What are the advantages of 12 month loans?

A 12 month loan is a useful way to get finance quickly to pay for large purchases or increase your cash flow in the short term.

Providing you have a good credit record and keep to your repayment plan, a 12 month loan can be a cheaper alternative to credit card borrowing.

A 12 month loan can help you:

  • Budget the cost of large purchases

  • Solve short-term cashflows

  • Take control and manage existing debts

  • Repay borrowed cash quickly and pay less interest overall

The best lenders offer low-rate loans with flexible payment options, so providing you don’t default on repayments, a 12 month loan can be a low-risk form of credit.

What are the disadvantages of 12 month loans?

As long as you keep up repayments and don’t borrow more than you can afford, a 12 month loan can be a good borrowing option; however, there are some pitfalls to watch for:

  • Short term loans often have higher interest rates

  • You’ll have less time to pay off your loan, so your monthly payments will be larger

  • Your approved interest rate may be higher than advertised

  • You could damage your credit score if you default on repayment

  • Penalties for late or missed payments can be high

Only get a short-term loan as a last option, and watch out for very high interest rates from some direct lenders.  If you can afford to pay for purchases or pay off other debts with cash or savings, turn to those first.

Are there any alternatives to 12 month loans?

There are several other options to consider if you need a short-term loan.

  • Buy Now Pay Later: This is an Interest-free, point-of-purchase credit option available from most online retailers.  This is ideal for spreading the cost of online shopping but is less flexible than a 12 month loan.

  • Credit cards: A credit card will allow you to borrow money, sometimes without charging interest for a set period. You can pay off the amount you owe in full each month or make smaller repayments and spread the cost.

  • Overdraft: Your current account may have an overdraft facility that allows you to spend more than your balance. If you have an authorised overdraft limit, this could be a cheaper way to borrow compared to a loan.

  • Guarantor loans: This is an unsecured loan where someone else guarantees that the loan repayments will be made if you can’t make your repayments. You may pay a  higher interest rate if you can’t provide evidence of income.

The information provided does not constitute financial advice, it’s always important to do your own research to ensure a financial product is right for your circumstances. If you’re unsure you should contact an independent financial advisor.

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Frequently asked questions

Can I have two loans at the same time?

Yes, you can have multiple loans and as long as you keep up repayments it won’t hurt your credit score.

Many people have more than one line of credit, for instance, you may have car finance, a credit card, a mortgage and a personal loan.

How soon do I have to start paying back my 12 month loan?

Most lenders will require you to set up a repayment plan and start payments within 30 days of receiving the funds.  You’ll be charged interest from the date you recieve the money in your account.

Can I get a 12 month loan if I’m unemployed?

It’s possible, but it will be difficult and you’ll most likely have to pay a high interest rate.  Most lenders will require you to provide a source of regular income like a salary or a pension. A clean credit history and good credit score will boost your chance of approval but think carefully before taking out a loan if you don’t have a reliable way to repay it.

What is a 12 month loan?

It’s money you can borrow from a bank or money lender that’s paid back over 12 months with interest.

You can typically borrow anything between £500 and £25,000 and apply for credit via a bank, direct lender or broker.

It’s a short term unsecured loan, which means you don’t need to offer your property or a high-value asset as security against the loan.

Will applying for a 12 month loan hurt my credit score?

No, most lenders will pre-approve or reject you after a soft credit check.

A soft check allows banks, loan brokers and direct lenders to check your creditworthiness without affecting your credit rating.

Multiple loan applications in a short time period could have a negative impact though, so it’s best to use a broker and seek pre-approval for credit,  instead of applying to lots of lenders.

How quickly can I get a 12 month loan?

Online lenders can often give you a decision within minutes and you could get the money in your account within a couple of hours if you provide all the right documentation.

High street banks and traditional lenders may take longer, although if you apply with your own bank and your financial circumstances are straightforward, it can be arranged within an hour.

Can I get a 12 month loan with bad credit?

Yes, you can, but you’ll pay high interest rates so your loan will be expensive and you may find it tricky to get the amount you want.

There are lots of specialist money lenders who’ll consider your application and you’ll find it’s easier to get a 12 month loan from direct lenders if your credit score is poor.

Check your credit report and if your score is low, find out how to rebuild your rating so you can get better credit and borrowing choices in the future.