Short Term Loans

Paying off a loan over multiple years isn’t for everybody. We're here to guide you through the world of short term loans and help you to find options on your own terms.

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Table of contents

Written by Mark Grimley
Read time: ~5 mins
Published: 4th October 2023

What is a short term loan?

A short term loan allows you to borrow money and pay it back within a short period of time.

Typically, standard personal loans have repayment terms that can span over several years, leaving you needing to find the money for monthly repayments for a long time.

Short term lending has shorter repayment terms, allowing you to pay off your loan swiftly.

Generally speaking, any loan with a repayment plan lasting under twelve months is considered a short term loan, but every loan provider has their own definition of how long a short term loan lasts.

When you take out a short term loan, you'll be charged interest. Interest is how the loan provider makes money and is an amount you’re charged for borrowing the money. The amount of interest you’ll pay will differ depending on your circumstances.

Short term loans usually have a higher interest rate than other standard loans. This is because the cost of providing the loan can be much higher for the loan provider than a longer term loan.

Short term loans are a good option for those that need to borrow a relatively small amount and have the means to pay it off quickly.

APR is the interest charged for borrowing that represents the annual cost of the loan as a percentage. Comparing the APR of a loan can help you to figure out how expensive a loan will be. The APR of a loan also includes any standard fees you’ll need to pay.

APR may not be the best way to compare short term loans. When looking at short term loans, especially payday loans, the APR will likely be very high and may not be a true reflection of how much you have to pay, making it tricky to compare loans.

Instead, when comparing short term loans, we think that looking at the total amount repayable gives you a better understanding of how much a loan will cost. It’s how we order our results, as it makes short term loans at lot simpler to compare.

Use total amount repaybale instead of APR when comparing short term and pay day loans to get a better reflection of how much they’ll cost.

Short Term Loans Comparison

What are short term loans used for?

Short term loans can be used to cover urgent or unexpected bills or expenses. They can be used for things like:

  • Car repair costs
  • Fixing home appliances
  • Boiler repairs
  • Vet fees
  • Paying for furniture or white goods
  • Covering the costs of a family event

What is considered a short term loan?

Any type of loan that's repaid within twelve months is considered a short term loan by most lenders. It’s more rare, but some providers may also consider loans up to two years as short term loans too.

Short term loans with low-interest rates can be hard to find. The interest rates you’ll pay can be as high as 99.9%, so it’s important to check the annual percentage rate (APR) before agreeing to anything.

Payday loans vs short term loans

Because they have similar terms, many people understandably confuse payday loans with short term loans. These two types of loans have distinct differences.

A payday loan is a low value loan that's usually paid back within one month, on your next pay day, designed to help tie you over until you next get paid.

In contrast, a short term loan is usually repaid within 12 months and will typically lend you more money than just £100-£200.

Short term payday loans will have higher interest rates compared to other short term loans. This means they're best suited for when you need to borrow small amounts of money as a one-off. You can borrow as little as £100 as a short term payday loan.

How do short term loans work?

Applying for a short term loan will usually follow the same process as other personal loans:

  • Decide how much you want to borrow and how much you want your repayment period to last, and then choose a loan that matches what you can afford to repay each month.
  • You’ll share your personal details with the loan company such as how much you earn from any jobs or income, your home address, specific affordability questions, and employer details.
  • The loan company will review your information and check your credit history, looking into whether you've kept up repayments on other forms of credit in the past, like your household utility bills.
  • After reviewing your credit history, your loan application will either be accepted, rejected, or deferred. If accepted, the loan provider will make you an offer, explaining the annual percentage rate (APR) and terms of your loan. If your application is deferred, it means the loan provider needs more time to make extra checks.
  • Once your loan is accepted, you'll make your first repayment, either at the end of the month or thirty days after taking the loan out.
  • You'll repay your loan every month. Interest will also be added to your outstanding balance, increasing the total amount you’ll have to pay. Interest is charged because that's how loan companies profit from lending you money.

How can I get a short term loan?

To get a short term loan, you'll need to meet all the eligibility criteria.

To get a short term loan, you need to:

  • Be 18 or over
  • Live in the UK
  • Have proof of regular income
  • Provide proof of your address for the last three years
  • Give details of your current bank account
  • Share your contact details
  • Not be bankrupt or on an IVA
  • Pass credit history checks

Your credit score will impact whether you can get a short term loan and may also dictate the amount you're able to borrow. Your credit history may also contribute to the APR that you're offered.

Because short term cash loans are unsecured, lenders will want to perform a credit check to see if you've been responsible managing your money in the past. Some lenders have strict eligibility criteria and could reject your application if you have a poor credit rating.

There are products designed for people with poor credit ratings - these are otherwise known as short term loans for bad credit.

When applying for short term loans for poor credit, it's wise to see if you're eligible before a lender performs a hard credit check on you.

An eligibility checker allows you to check your suitability for a variety of loans with just a single form. Eligibility checkers don’t require a hard credit check, meaning that your credit rating won’t be impacted. This makes the Choose Wisley Eligibility Checker the perfect tool to see if a loan is right for you before you apply.

A hard credit check is where a lender will review your entire credit history when you apply for a credit product, leaving a record on your report.

This record is visible to other credit lenders, and too many hard searches on your file will make lenders less likely to offer you a loan..

Where can I get a short term loan?

There are plenty of places you can get a short term loan from:

  1. At a high street bank branch

  2. Online at a short term loan direct lender

  3. Online through a comparison website (like ours)

  4. With a loan broker who can help you find the best deal

  5. At the post office

  6. With a credit union

How much does a short term loan cost?

When you take out a short term loan, you'll need to pay;

  • The original amount that you borrowed
  • The interest on the amount you borrowed
  • Any fees and charges which will be in the terms and conditions of the loan

When researching payday loans, it’s not uncommon to see APRs as high as 1300%. This number can seem alarming, but it’s important to understand that you won’t ever actually pay that much interest on a payday loan.

The reason behind this is, in 2014, the Financial Conduct Authority (FCA) put a cap on the amount of interest high-cost short term loans lenders can charge. The cap is currently 100% of the amount borrowed. It means if you’ve borrowed £200, the maximum interest and fees you can be charged is £200.

Payday loans still advertise their high APRs because they must demonstrate what you would have been charged if it was ‘cap-free’ and all Representative APRs must be displayed annually. When comparing payday loans with small short term loans it’s easier to compare the total amount you would need to repay.

That’s why we show the total amount repayable as it gives you a better understanding of how much a loan will cost, and it’ s how we order our results.

What are the pros and cons of short term loans?

  • Can help cover an unexpected or urgent expense
  • They’re unsecured, meaning you don’t need to secure the loan against your home
  • you may be able to get a short term loan, even if you have a poor credit rating, as long as you have a regular income, including employment or universal credit
  • No long term commitments. Loans can be repaid within months
  • Can flexibly change repayment amounts or pay the loan in full early, sometimes without a fee
  • Likely to have a high rate of interest compared to other personal loans
  • They’re not a long term financial solution
  • Missing one repayment may harm your credit report, making borrowing in the future more difficult

Calculate the costs of your loan

Choose Wisely has a Loan Calculator to help you better understand the cost of loans and find the right loan for you.

Short term loans FAQs

Can I get a short term loan with a poor credit history?

If you have a poor credit history, you still have options. Although you'll have an easier time being accepted for a short term loan if you have a good credit report, some lenders will accept applications from those with a poor credit report.

Some lenders will accept your application as long as you have a regular income and can therefore afford repayments.

Having a poor credit history may limit the amount you can borrow, and you may be offered a higher APR than advertised.

Are short term loans safe?

Short terms loans are safe as long as you borrow responsibly and use a lender authorised and regulated by the Financial Conduct Authority (FCA).

Do short term loans affect credit rating?

Having a short term loan on your credit file may harm your credit report regardless of how you use it. This can impact your credit score no matter how you manage your repayments.

If you miss repayments or are late paying, you could further harm your credit rating, making it more challenging for you to get credit products like credit cards or loans in the future.

Do short term loans have higher interest rates?

On average, short term loans do have higher rates of interest. This is because it can be more costly for lenders to provide these types of loans.

How many short term loans can I have?

You can have multiple loans simultaneously across different lenders.

Having multiple loans at once can be difficult to manage because you'll have to keep up with various repayments that may be happening on different dates over the months. Lots of loan applications in a short time could hurt your credit score too, so try to limit the number of applications you make within six months.

Warning. Late repayment can cause you serious money problems. For help, go to:

Written by
Mark Grimley
Head of Partnerships & Take Control Author at Choose Wisely

Mark joined Choose Wisely in 2015. He continues to work in close contact with the providers, brokers and journalists operating in the world of consumer credit.

Important Information.

All of the information in this guide is correct at the time of writing.

If you complete a loan search application on the Choose Wisely website, the rates shown may vary based on your personal circumstances, are subject to status and are available to those aged 18 and over. Rates available range from a minimum of 13.9%APR to a maximum of 1721%APR Representative and loan repayment periods range from 3 to 60 months.

If you need financial advice you can visit stepchange, speak to citizens advice, call the national debtline or speak to

If you've been declined, please refer to your credit report to gain an understanding of why before making further applications.
You can access your credit report for free from Credit Karma, Clearscore or Experian.

Warning: Late repayment can cause you serious money problems. For help, go to