Short-term loans
Compare short-term loans today
- Search for the right short-term loan, before you apply
- Compare loans from trusted providers
- Check your eligibility without any impact on your credit score
What are short-term loans?
A short-term loan is when you borrow money for a short period of time, usually less than 12 months although it can vary between providers.
Short-term loans are typically personal loans that are unsecured. This means you don’t have to put up an asset, such as your house or car, as security for the loan. But the greater risk of defaulting (not repaying) means you’ll usually be charged a higher rate of interest than for a standard loan.
What is a short-term loan good for?
A short-term loan can be useful if you face an unexpected expense. For example, it could help with:
- Buying or repairing a boiler
- Car repairs
- Paying vet’s bills
- Getting dental work done
- Replacing old furniture or home appliances
- Buying a new phone or laptop for work
- Last-minute travel arrangements for a family emergency.
Taking out a short-term loan could be a good way to deal with an immediate issue, but you need to be sure you can pay back the loan quickly and on time.
How much can I borrow as a short-term loan?
You can typically borrow up to £3,000 with a short-term personal loan. However, you might be able to borrow more with a regular personal loan. Most banks and building societies offer personal loans up to £25,000.
Exactly how much you might be able to borrow with a short-term loan will depend on your personal circumstances. Lenders will look at a range of details to help them decide whether and how much to offer you, including:
- Your income and outgoings
- Your credit score
- Why you’re applying for a loan.
If you’re looking to spread the cost of a loan over a year or more, you can use our loan calculator to get an idea of how much your monthly repayments could be.
Try our loan calculatorCan I get a short-term loan?
To be eligible for a short-term loan, you’ll have to meet the lender’s criteria. This varies among lenders but, as a general rule, you must be:
- Aged 18 or over
- A UK resident
- Employed, with a regular income
- A bank customer with an active account
- Able to provide your address history for the past three years.
Before making a formal application for a loan, it’s a good idea to use our loan eligibility checker. It can help you find short-term loans you’re most likely to be accepted for. It’s a soft search and won’t affect your credit score in any way.
Check your eligibilityCompare 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.
Are short-term loans low interest?
Compared with traditional personal loans, short-term loans tend to have considerably higher interest rates.
However, the better your credit score, the better your chances of a cheaper interest rate.
How can I find the cheapest short-term loan?
Even if you need a loan quickly, taking one out should never be a rash decision. It’s important to see if you can minimise the cost of borrowing.
Start by comparing interest rates and APRs (annual percentage rates) to get an idea of how much the loan could cost you overall. Don’t forget to include any fees or charges that might apply.
Remember, the cheapest way to borrow money is by choosing the shortest loan term with monthly repayments you can comfortably afford. The longer the term, the more you’ll pay in interest overall.
Is a short-term loan the same as a payday loan?
While a payday loan is a type of short-term borrowing, it’s not the same as a short-term loan.
Payday loans were originally designed to tide you over until you next got paid. They’re usually for smaller amounts than a short-term loan, typically from £50 to £1,500, and charge very high rates of interest.
Although the Financial Conduct Authority (FCA) has capped fees for late payment at £15 plus interest on what you borrowed, interest rates on payday loans can be as high as 1,500% APR.
Think very carefully before applying for a payday loan and always explore other options first. If you can’t make the repayments on a payday loan, the interest and fees will quickly mount up and could lead to a spiral of debt.
You can’t compare payday loans with Compare the Market.
What to do if you’re struggling with repayments
If you can’t make your loan repayments, it’s always better to be honest and tell your lender so they can help you find a solution. They might suggest:
- Changing your repayment schedule
- Reducing the size of your regular repayment (for a set period)
- A payment holiday. This lets you pause your monthly payments for a short while, although the interest will still add up.
If you’re struggling financially, free help is available from debt advice charities such as Stepchange and National Debt Helpline. Or you can call the Citizens Advice debt helpline on 0800 240 4420.
Read our guide on how to get out of debt. It could help you get on top of your finances.
What are the pros and cons of short-term loans?
Short-term loans can be useful as a quick financial fix, but they’re not suitable for everyone. Consider what’s right for you and your circumstances before applying.
Benefits
If you’re confident you can repay the money on time, the benefits of a short-term loan include:
- Simple and convenient – it’s easy to apply online
- Fast payment – you could have the money in your bank account the same day
- No security needed – short-term loans aren’t secured against your home or car
- Less time for interest to build up compared with longer-term loans
- No long-term commitment.
Disadvantages
Short-term loans also have potential downsides. They include:
- Higher interest rates than longer-term loans
- Smaller loan amounts – you might not be able to borrow as much as you need
- Limited repayment periods – you might have less than a year to pay back what you owe
- Missed payments can harm your credit score
- Potential to get deeper into debt if you’re already struggling financially.
Alternatives to short-term loans
Before you apply for a short-term loan, it could help to explore the options below instead:
0% purchase credit cards
A 0% purchase credit card lets you spread the cost of an expensive purchase. If you repay the balance in full before the end of the 0% period, you’ll pay no interest. If you think this might be a a struggle, then – at the very least – you’ll need to make the minimum monthly payment on time.
0% money transfer credit cards
A 0% money transfer card lets you move money from your credit card into your current account to cover unexpected expenses.
You won’t pay any interest for a set period, but there’ll be a one-off fee to make the money transfer – usually around 3% to 5% of the amount you switch over.
0% overdrafts
If you have an interest-free arranged overdraft, see if it could cover what you need. Stay within the pre-approved limit, though, or you’ll be hit with interest charges.
Salary advance
You could ask your employer for a salary advance (your employer must be registered with a salary advance provider). If possible, this would give you access to cash for an urgent bill, for example, without paying interest. But you’ll get less money on payday, so some careful budgeting might be needed.
Family or friends
If a friend of family member is willing to lend to you, be sure you’re both clear about the repayment plan to avoid any fallouts.
Frequently asked questions
Will a short-term loan affect my credit score?
Like any form of borrowing, a short-term loan can affect your credit score temporarily. This is because the lender will run a hard credit check when you apply, which will leave a mark on your credit file.
But as long as you make your repayments on time and in full, your credit score should gradually improve. Missed or late repayments, on the other hand, will damage your score and future chances of borrowing.
Can I get a short-term loan with bad credit?
It’s possible to get a short-term loan with a poor credit score, but your options may be limited. If you’re looking for a loan for bad credit, it’s likely that you’ll only be able to borrow a small amount and be charged a high rate of interest.
Do I need a guarantor to get a short-term loan?
You don’t typically need a guarantor to get a short-term loan because it’s a type of unsecured personal loan.
But a guarantor loan might be an option if you’ve been turned down for a loan because of bad credit. A guarantor loan is when a family member or friend agrees to pay off the debt if you can’t make the payments.
How quickly can I get a short-term loan?
Once you’re accepted for a short-term loan, you could have the money in your bank account within hours, depending on the lender.
