- October 23, 2023
- Mark Elwes
A Comprehensive Guide to 12-Month Loans
Table of Contents
When one thinks about terms like small, flexible, fixed, and easy to manage, short-term loans fill the gap perfectly. Apart from helping one finance an emergency, there is a lot to love about the loans. One can use these small loans for nearly anything. Perhaps your savings are low or cannot get timely help from your family if you stay alone, short-term loans provide the much-needed cash injection for needs.
This quick guide discusses 12-month loans in detail. It would help one know the meaning, the need and the criteria to manage these loans well. It is the most important information for 18+ individuals building credit or who need cash often for small needs or emergencies.
What does a 12-month loan imply?
A loan for 12 months is a short-term loan one takes for 12 months or a year. In this, one repays the loan after completing the 12-month loan agreement. These are known as short-term loans because one usually uses them for small purposes unlike home renovation or buying up a home. Instead, one can use these in needs like medical emergencies, car repairs, or credit card debt clearance.
The primary criterion to qualify for these loans is affordability. It implies lenders prioritise income over credit score and history to approve a loan. If you hold a regular/part-time income proof, you can get the loan.
The borrowing amount usually stays around £5000 (the maximum). It does not imply that you should borrow straight away £5000. Instead, identify your requirements and loan up accordingly. It is important to borrow right because interest on these loans is high. This is because of the flexibility and ease of availability it hosts.
Who may qualify for a loan for 12 months?
Flexible loan options like 12-month loans originate online. It allows you to explore the best options before applying. However, check the basic criteria.
- 18+ and a UK citizen
- Hold a regular income proof (£800/month) minimum
- You must have a direct debit facility debit card
- Your credit report must reveal responsible management
- Must have your name on the electoral roll register
What documents do you need?
The documents requirement may differ from the lender-to-lender. However, the basic requirements stay the same. Here is the list of documents that you must keep handy before applying:
- Identity proof–driving license/ passport/ ID-proof
- Residential proof–current address on bills of at least 3-6 months old
- Income proof- salary slip/pension proof/ self-assessment/ part-time
- Bank statements of at least 60 days
- Prove your right to live and work independently in the UK
Note: Unemployed individuals with some part-time income can qualify for loans for 12 months. This is because getting one solely on benefits may prove challenging.
How can one with a poor credit history get an affordable 12-month loan?
As mentioned above, credit history does not impact loan approval. However, you may not get the expected interest and terms with a poor or low credit history. Thus, before exploring 12-month loans from direct lenders in the UK premises, try to improve credit. You can do that fast in the following ways:
- Try to pay the pending utility bills
- Screen your credit report for paid debts and report it.
- Break ties with any joint account ( if not used for 8 months)
- Consolidate or merge some short-term debt
- Update your information on the electoral roll
- Improve income prospects or present additional income proof
These are some ways to improve your prospects to get a loan affordably.
What are the benefits of loans for 12 months?
It is a useful way to get finance quickly to pay for large purchases without waiting and saving up. It helps one capitalise on the business and personal opportunity within time. There are other benefits of the 12-month loans:
1) Flexibility to pay comfortably
Lenders allow the flexibility to choose the repayment period. Under this, you can borrow a sum for 12 months or even less if your finances abide by it.
2) Fixed instalment sum
It is one of the best benefits of a small loan. The lender provides you with a clear map of the costs and the repayment days. You must follow payments accordingly. If you do not skip a payment or two, you never pay more than you ought to on the loan.
3) No requirement for a guarantor
If your financial health and credit is good, you do not need a guarantor to qualify. Instead, you can get the loan immediately. Moreover, the unemployed also do not need one unless they need a high amount without the relevant affordability proof.
How much will a 12th-month loan cost on average?
The table provides a rough example of the amount a 12-month loan will cost you. The below table considers loan rates based on APR 25.4%
|Amount borrowed||Repayment Term||APR (example rate)||Monthly repayments||Total repayments|
Should you consider a 12-month loan for your needs?
There are multiple lending solutions available in the market. However, not every product is apt for your needs. For example, if you need a salary-based loan and pay it in a one-time payment, a check payday loan would be best. Instead, of short-term loans where you can spread the costs of the payments in instalments.
You can get better rates on 12-month loans than on payday. It is ideal for a person with a fixed income and liabilities. Paying in instalments is ideal and helps with credit scores. You may get instalment loans for bad credit in the UK and pay without disturbing the latter part of the finance (budget).
Thus, you must know the situations, where a loan for 12 months can be the best fit. Here are some:
- You need money urgently or within the same day.
- You find it challenging to qualify with another mainstream lender.
- You seek better or lower interest rates for your profile.
- You need a relatively small amount of money.
- You require a manageable repayment framework with the flexibility to re-schedule payments.
Most 12-month loans include 12 equal monthly instalments. You may get 6 months of the repayment schedule and plan the rest according to your changed finances. Eventually, it is all about repaying the loan comfortably. The lender usually takes up repayment through automatic deductions. You can also stop the facility and switch to manual payments later.
Mark Elwes is the Editor-in-Chief at Extramilefinance. He is a notable member of the content strategy team since his joining in 2017. Driven by his fondness for the finance industry, he has spent years gathering as much knowledge as possible about various financial products that include loans also. Previously, Mark worked as a senior journalist writer with experience in writing blogs and articles.