12 Month Loans

Spread the cost of something bigger

A 12 month loan is for costs that are too big to clear in two or three paydays, but that you could comfortably pay off over the course of a year. Most people who choose one are borrowing somewhere between £1,000 and our maximum of £2,750. We see them used for things like:

• A cheap runaround car. Standard car finance often isn't available for older cars, or if you're buying from a private seller rather than a garage.
• A bigger one-off cost that you can't absorb from the next couple of pay packets, but could manage a little at a time.

Three months or twelve? It comes down to the monthly payment

A short loan over a few weeks or months is a bridge: you're short now, but your money should be back on track soon. A longer loan is about fitting the repayments into your normal monthly budget, because next month's wages won't fix the problem on their own.

More in pounds, but a lower APR

This is the part that confuses most people. Over a full year, you'll usually pay more interest in pounds than you would on a payday loan, simply because you're borrowing for longer. But the APR – the yearly rate – on a 12 month loan is normally much lower. A lower APR doesn't always mean a cheaper loan: always look at the total you'll repay as well.

Whatever you borrow, the pattern is the same: a longer loan means smaller monthly payments, but more interest overall. Choose the shortest term whose monthly payment you can comfortably afford – your lender will show you the exact cost of each option before you sign.

What you can expect

• Fixed monthly repayments – the same amount each month, so it's easy to budget for.
• Unsecured – nothing is secured on your home or car.
• No guarantor – you don't need anyone to back your loan.
• No arrangement fees – it costs nothing to apply or to set the loan up.
• Early repayment – you have a legal right to repay early, in full or in part, at any time, with no early repayment charge. You'll save the interest you no longer owe – ask your lender for a settlement figure.
• 14 days to change your mind – you can withdraw by repaying the amount you borrowed plus the interest for the days you had it.

Where short-term lending ends

Loans repaid within a year are often called short-term loans. They used to be much shorter: when the Competition and Markets Authority studied the market, over 80% of payday loans lasted 31 days or less. Today most are spread over several months, and a loan of up to 12 months is the longest kind of short-term loan.

Choose a term of 13 to 18 months and it's no longer a short-term loan. It's a longer instalment loan: smaller monthly repayments, but more interest overall.

Only need a smaller amount for a few weeks? Take a look at payday loans, or compare all our loans.