A short term loan is a form of High Cost Short Term Credit (HCSTC). It’s a financial service which lets customers borrow a small amount of cash for a short period of time. But how long is ‘a short period of time’?

Well, asking ‘how long is a short term loan’ is bit like asking how long a piece of string is (we’re sure your dad has probably cracked that dad joke at some point), but ultimately, a short term loan cannot last longer than a year.

The maximum loan term is twelve months, and this usually means the maximum number of repayments is 12, although this can vary depending on your loan agreement.

Usually however, short term loans can last anywhere between one and three months. A one month short term loan is called a payday loan, and anything longer than one month is called an instalment loan because – you guessed it! – you pay in instalments.

Instalment vs Payday Loans

Instalment loan repayments tend to be smaller than a single payday loan repayment, but this is because you aren’t repaying the loan in one go – you are actually making a series of smaller repayments. Although this may be more affordable for some people, overall, you will end up paying more in interest and you need to have a better overview of your financial circumstances for the coming months. For example, if you know if you have an MOT coming up, you might have to budget in advance of this to ensure you meet all of your financial commitments.

It’s better to agree to make repayments you can afford than to agree to a loan repayment you can’t afford. Either way, missing your loan repayments or not paying in full can cause serious money problems and can make credit harder to obtain in the future, so you need to be careful when applying for a loan and only apply if you really need one.

What about credit files?

Another question to ask on the topic of short term loan time frames is how long the record will stay on your credit file. All regulated lenders must do a creditworthiness and affordability assessment before they approve or decline your application. Usually, this involves checking your credit file to see if you have any outstanding credit commitments and if there’s anything that might suggest you won’t be able to make your repayments on time.

A loan record will remain on your credit file for six years once it has been settled. This means that even after you have made all your repayments, other creditors can still see if you had a loan or not and what the current status of that loan is. As long as the loan is settled on time, there shouldn’t really be any negative information to report, but if you do get into financial difficulty, you should contact your creditor as soon as possible to arrange an alternative plan.

Because the record stays on your credit file for so long, you really need to make an educated decision in regard to any loan application. Whether or not you are approved, even making an application can show on your credit file and too many applications (especially rejected ones) in a short space of time can have a negative impact on your credit file.

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I think I need a loan

Instead of immediately making a short term loan application, it might be a good idea to see if you can make a few small sacrifices in your normal monthly expenditure if a surprise expense pops up.

However, if you’re nearing the end of the month and you’ve already spent the majority of your income and something drastic happens, like a boiler failure or a popped tyre, a short term loan can help you bridge the gap to your next payday, because even though the repayments tend to be monthly, you can select your first repayment date to suit you. Which, if your payday is next week means you may only have to borrow a small amount of cash for a week.

If you do find yourself in this position, then cashasap.co.uk may be able to help. As a direct online lender, we can provide you with the cash you need in as quickly as 15 minutes if your application is approved. If you do decide to make an application, please make sure you consider your financial circumstances at the time of repayment and don’t apply for more than you need. You can check out if you’re eligible for a short term loan here.