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12-month loans

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What is a 12-month loan?

A 12-month loan is a type of short-term loan that could allow you to borrow money and pay it back, plus interest, in fixed monthly instalments over the course of a year. 

Because the time to repay a 12-month loan is so short, it may be harder to find one-year loans for larger sums of money. But how much you can borrow over a year depends on your credit rating and affordability. 

With a 12-month loan, you’ll typically save on interest compared to longer-term loans. However, the monthly repayments could be higher than if you paid the loan back over a longer period.

What can I use a 12-month loan for? 

There are lots of different ways you could use a 12-month loan, depending on your personal needs. For example, a 12-month loan could help you:

Can I get a 12-month loan with bad credit?

It’s certainly possible to find a 12-month loan with bad credit, if you can prove you can afford the repayments, but your options are likely to be more limited. Depending on your credit score, you may need to look for a lender that specialises in bad credit loans.

If you have bad credit, you may not be able to borrow much money over such a short period. You’ll also typically face higher interest rates. That’s because lenders could see customers with bad credit as at higher risk of not repaying the loan.

If you’re approved for a 12-month loan, making your repayments in full and on time could help build your credit score and get back on the right financial track. But if you miss payments, you risk doing further damage to your credit rating. 

Making multiple credit applications in a short period of time could signal to lenders that you’re struggling financially, so it’s good idea to check what loans you’re likely to be eligible for before you apply. Use our loan eligibility checker to see what 12-month loans you could be eligible for, without it impacting your credit score. 

Tips for improving your credit score

If you’ve got time to build up your credit score before you apply for a 12-month loan, it could improve your chances of being approved and influence the interest rate you’re offered. For example, you could start by:

  • Getting on the electoral roll
  • Correcting any mistakes on your credit file
  • Setting up direct debits to avoid missing any future payments.

For more tips, read our guide on how to build your credit score.

How much is a 12-month instalment loan?

That depends on how much you borrow and the APR you’re charged on the loan. The APR you’re offered on a 12-month loan will vary depending on the lender and is based on factors like the size of the loan and your credit rating.   

Here’s some examples of how much you could pay back for a 12-month loan based on different loan amounts and interest rates.

Loan amount Interest rate 12 monthly repayments of: Total amount you’ll pay Total interest you’ll pay
£2,000 15% £179.63 £2,155.54 £155.54
£2,000 40% £199.05 £2,388.64 £388.64
£5,000 15% £449.07 £5,388.86 £388.86
£5,000 40% £497.63 £5,971.59 £971.59

To see how much it could cost you to borrow what you need for one year, try out our loan calculator.

Advantages and disadvantages of a 12-month loan

Here are the main pros and cons to consider when deciding whether to take out a 12-month loan: 


  • Once you’re approved, you’ll typically get the funds quickly – within days, or even on the same day. 
  • Apart from a few common exceptions (for example, putting the money down as a deposit on a house or investing it), you’ll be able to use the money as you choose. 
  • By choosing to pay off the loan over one year, you’ll pay less interest overall than for longer term loans for the same amount, and you won’t be tied to the debt for several years. 


  • Your monthly repayments will be higher than they would be if you chose to pay off the loan over a longer term. 
  • It may be difficult to borrow a large sum for this short loan term, especially if your credit rating is low. 
  • The APR charged tends to be higher for small loans, and depending on your credit rating, you may not be eligible for any advertised representative rates.

12-month loans: a summary

A 12-month loan could help cover an unexpected cost, or let you spread the cost of a big financial purchase over a year. 

How much you can borrow for a year depends on your individual circumstances. Smaller loans tend to come with a higher APR but paying back your loan over a shorter term means you could pay less in interest overall. 

As with any credit, it’s vital to make sure you can realistically afford the repayments, which will be higher than for a loan with a longer term. Missed or late payments could damage your chances of getting credit in the future.

How to find a 12-month loan with Compare the Market

Use our loan eligibility checker to see what loans you could be eligible for from our panel of providers. Because it’s a soft credit check, it won’t show up on your credit file for other lenders to see or affect your credit score.  

To help you compare 12-month loans, you’ll need to tell us a little bit about yourself, including:

  • How much you want to borrow
  • Some personal details, such as your date of birth and employment status
  • Your address history for the last three years
  • Your annual income
  • Any financial dependents.

We’ll let you know which of the loans we compare you could be accepted for based on the loan provider’s lending criteria. That way you can compare different rates and find an option that suits you.

Compare the Market Limited acts as a credit broker, not a lender. To apply you must be a UK resident and aged 18 or over. Credit is subject to status and eligibility.

Frequently asked questions

Can I get a 12-month loan with no credit check?

You’ll need to consent to a credit check to apply for any type of credit, including 12-month loans. Legitimate and regulated lenders use credit checks to confirm your identity and assess your suitability for the loan.

Before you start looking for loans, it’s a good idea to check your own credit report for free with the three main credit reference agencies. That way, you can see what lenders will see, correct any mistakes and see if there are any steps you can take to improve your credit score.

Can I get a 12-month loan with bad credit and no guarantor?

Whether or not you can get a 12-month loan with bad credit and no guarantor depends on how lenders view your affordability. They’ll do this by looking at your income and your regular outgoings.

If you have a poor credit history you may be limited in how much you can borrow, and you’re likely to pay higher rates of interest.

You can’t compare guarantor loans with Compare the Market but you can use our loan eligibility checker to see which of our loans you’re likely to be accepted for. It’s based on a soft check of your credit file, so it won’t affect your credit score.

What alternatives are there to a 12-month loan?

Credit cards are another option for short-term borrowing, depending on how much you want to borrow.

If you have a good credit score, you could even qualify for a 0% purchase credit card. If managed responsibly, you could use this type of credit card to pay upfront for a large purchase and then spread the cost over a fixed period with no interest to pay.

You can use our credit card eligibility checker to see which credit cards you’re likely to be accepted for from our panel of providers. As with our loan eligibility checker, it won’t affect your credit score.

The content written in this article is for information purposes only and should not be taken as financial advice. If you require support on the products discussed here, please speak to your bank/lender or seek the advice of an independent professional financial advisor. We also have more information on our Customer Support Hub.

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