Can You Get A 12 Month Loan?

Can you get a 12 month loan?

By Matt Fernell, Editor-in-Chief at Published 4th January 2024.

Matt Fernell

It is possible to borrow money over one year, but there’s a lot to think about first. Here’s everything you need to know about getting a 12 month loan.

What is a 12 month loan?

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

You can typically borrow anything between £1,000 and £25,000; however, short-term loans are usually for relatively small amounts because you only have 12 months to pay it back. 

12 month loans are unsecured, which means you don’t need to use your property or a high-value asset as security against the loan.

You can apply for a loan via a bank, direct lender or broker. We can help you find 12 month loan quotes that work for you.

What can I use a 12 month loan for?

You can use a 12-month loan like a personal loan, which means you can spend it on anything you like.

Some of the main reasons people may need a 12 month loan include:

  • To buy a new car

  • To pay for a family holiday or event

  • To pay for furniture or white goods

  • To pay off debts

12 month loans are not cheap, but they can help if you need to spread the cost of a large purchase or increase cash flow for a short period.

What’s the interest rate on a 12 month loan?

The interest rate indicates how much money you’ll pay back on top of the amount of cash borrowed.

Interest rates on 12 month loans can be higher than interest rates on longer-term personal loans, although you’ll borrow for a shorter period, which will reduce the interest you pay overall.

The interest rate you’ll pay on a 12 month loan could be anything between 3% and 99.9%, depending on:

  • the type of lender

  • how much you borrow

  • your credit rating

Check the annual percentage rate (APR) you’re quoted and the total cost of the loan before you agree to anything.  Remember that the higher the interest rate, the more the loan will cost you.

What does APR mean?

APR is short for annual percentage rate - which means the amount of interest you’ll pay on top of the amount you’ve borrowed. Any extra fees or charges are added to the loan amount before APR is calculated.

It’s a legal requirement for credit lenders to show their APR so you can make an easy and fair comparison of interest rates between lenders.

Is it possible to get a 12 month loan with bad credit?

You can get a one-year loan if you have a poor credit record; however, your choices will be more limited. Not all loan providers are willing to lend to borrowers with bad credit, and those that are will usually charge you higher interest rates or limit how much you can borrow.

If you’re worried about your credit score, it’s a good idea to check it before starting any loan applications. Having a loan application rejected will damage your credit score further, so only apply if you’re confident you will be accepted.

If possible, take steps to improve your score first. This will give you the best chance of finding a loan at a good interest rate. Here’s more on how to get a loan if you have bad credit.

How do I apply for a 12 month loan?

You can apply for a 12 month loan in several ways.

  • Online with a direct lender, bank or broker

  • Over the phone

  • In person at a bank branch

If you’re clear about your borrowing needs, you may benefit from better rates if you apply for your loan online with a direct lender or via a broker.

However, if you need to talk about your options, applying for a loan over the phone or in person may be better.

What documents will I need to provide?

This will depend on how you apply for the loan. If you apply with your current bank, they’ll have your records, so it may be pretty straightforward; however, a direct lender or loan broker will need you to prove your identity and loan eligibility.

Documents you may need to provide include:

  • Proof of identity, such as your passport, UK driving license and a bank statement less than three months old

  • Proof of residence, such as a utility bill less than three months old, mortgage statement or water bill less than 12 months old

  • Proof of your right to live and work in the UK

  • Proof of income, such as payslips, 12 months bank statements, tax calculation, pension or benefit evidence

  • Employer details, evidence of self-employment or directorship

You will also need a bank account with the facility to set up a direct debit or standing order and fit any other eligibility criteria set by the lender.

Are there any alternatives to 12 month loans?

Short-term loans can be an expensive way to borrow, so it’s worth looking at all of your other options first. 

0% purchase credit cards

0% interest credit cards allow you to spend a certain amount without charging you interest for a set amount of time. For example, you could get a card with a credit limit of £2,000 with a 0% period of 18 months. 

That means you could buy something for up to £2,000, provided you made at least the minimum monthly payments and cleared the balance within 18 months; you wouldn’t pay any interest on what you borrowed.

If you don’t pay the balance off in time, the APR you will be charged will likely be high. It’s therefore important you clear the debt to avoid hefty interest charges. Find out more about how 0% purchase credit cards work here.

Buy Now Pay Later 

Buy Now Pay Later (BNPL) is a credit agreement you can enter into when you make some purchases. They can be offered by the retailer or by a third-party provider.

They allow you to pay for your purchase over a period of time, either in equal weekly or monthly instalments or in full after a fixed term. They are usually spread over a relatively short period of time, for example, 30 days or three months.

Many BNPL deals are interest-free, so you won’t be charged any interest on top of the cost of the purchase, provided you pay the balance within the term.

However, check the terms carefully, as some will charge interest or high fees if you miss a payment.


If you only need to borrow a small amount, you could use the overdraft on your current account. You may have an interest-free overdraft limit, which is an amount you borrow without incurring interest charges.

If you’re not sure what your overdraft limit is, speak to your bank. If you have an authorised overdraft, the charges may be lower than taking out a loan or using a credit card to make a purchase. However, using an unauthorised overdraft will likely come with higher charges, so check your limits before using your overdraft.

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.