Short-term loans are any sort of borrowing with a short repayment period. Personal loans, like the ones you’ll see when you compare rates with us, typically have terms of 12 months upwards.
Although a loan of just one or two years could still be considered a short-term loan, if you need to borrow money for even less time, you might have to look at some alternatives to traditional personal loans.
You might need a short-term loan to cover urgent bills. Loans for short-term use tend to be available quickly because they’re unsecured and require no collateral, such as a house or a car.
You can usually apply online, with a decision in minutes.
Be careful searching online for short-term loans – the results you find are likely to point you towards payday loans. And it might not be obvious that that’s what they are. Payday loans usually have very high rates of interest, as well as fees, so they’re a very expensive form of borrowing.
They’ll also show up on your credit record. And that can make it hard to get other types of credit, like a mortgage, if a lender sees that you’ve had a payday loan in the last few years.
You can compare loans with us by choosing the repayment term, but these will typically be loans with terms of one year or longer. If you need short-term borrowing, you might want to consider some alternatives to a traditional loan product.
Look into some of these alternatives to short-term loans that’ll help you avoid the high interest rates and fees that come with a payday loan.
A few lenders will offer flexible loans. These allow you to draw down the loan money as and when you need it and choose how much you repay each month, subject to a minimum repayment amount. You won't be charged for repaying the loan in full early, so they can be used as a short-term loan.
The APR is likely to be higher than on a typical, inflexible personal loan. A borrowing fee may also apply which will need to be paid whether you repay the loan early or not. Some payday loans are also marketed as ‘flexible’, so take care not to take one out thinking it’s a more standard loan product.
You could take out a personal loan then just repay it early. You’re always allowed to repay a loan early, but there’s usually an extra charge for this to compensate the lender.
Check terms and conditions so you know how much early settlement will cost you if you’re considering using a personal loan in this way.
IF you’ve got a good credit record, you might be able to take out a 0% credit card to use as a short-term loan. So long as you can use a credit card to pay for what you need the money for.
If you use it correctly, it’ll function as an interest-free and flexible loan. But you need to make sure you can repay at least the minimum amount each month and pay back the full amount before the 0% term is up.
All credit cards give you at least a month interest free, so if you only need a very short-term loan, any credit card could be an option if you can pay it off in a few weeks.
Low APR credit cards might be another option that could have a lower rate of interest than a payday loan or other forms of short-term borrowing.
Some current accounts have a 0% overdraft on relatively small amounts of money. You could consider switching if your current account doesn’t have this feature.
If you don't have a 0% overdraft, check whether the interest or fees on a normal authorised overdraft would still be cheaper than taking out a loan – if it’s a small amount over a very short-term it might still be the cheapest form of borrowing.
Don’t exceed your overdraft limit, or fees and interest are likely to prove very expensive.
One option that you may want to explore is peer-to-peer lending, which lets you borrow money directly from investors and savers.
Some peer-to-peer lenders allow you to repay early without penalty, so they can work as a short-term option.
When you compare loans with us you can filter your results to see just peer-to-peer loans.
Credit unions are not-for-profit organisations which pool members' savings and lend them out to other members.
They tend to be quite flexible, so they might allow borrowing of smaller amounts over shorter terms, or early repayment on loans.
You'll need to be part of the community. And some ask you to save with them for a certain amount of time before taking out a loan.
Whether you opt for a standard short-term loan product or other types of short-term borrowing like a loan or overdraft, the requirements will be similar:
Whatever type of product you choose for a short-term loan, compare these features to find a suitable and cost-effective option for you:
That’ll help you do a like-for-like comparison of the cost of interest on your borrowing
Will you have the flexibility to take the loan over a shorter term or to repay early?
Could the interest rate go up or down over time? Think about how an increase in interest could affect your ability to repay the loan
There are lots of options for short-term borrowing that don’t need a guarantor.
If you’ve had credit problems in the past a guarantor could make it easier to get a loan at a more competitive rate.
Any credit application, including short-term loans, will show up on your credit record.
But if you make your repayments on time, you could build a credit history and improve your credit rating.
If you’ve had credit problems in the past, you’ll have less loans available to you and you might be charged more interest.
It can also affect the amount you can borrow, so you might be limited to a smaller loan.
You can use our Smart Search feature when you apply for personal loans through us, to see your chance of acceptance for loans before you apply.