What are short term loans?

Short term loans are personal loans. You borrow money from a lender and agree to pay it back in full (plus interest) over a shorter term – say 12 months.

At Asda Money, we help find the right loan for you from across our panel of trusted UK lenders. Our lenders offer loans from £1,000 to £25,000 over one to seven years.

What is the shortest loan term?

Some lenders may offer you short term loans over just one month, whereas others provide loans with a minimum period of a year or so. At Asda Money, we work with a panel of trusted UK lenders. Our lenders offer loans with a minimum repayment term of 12 months.

You’ll need to pay interest on the monthly repayments and this will likely be at a higher rate than a longer term loan. Lenders view short term loans as higher risk, as there’s more chance of someone defaulting on one, which is reflected in the increased interest rate. By agreeing to a shorter period to pay it back, your monthly repayments will also be higher than a longer term loan for the same amount. But the shorter the term, the less you’ll pay in interest overall.

The right loan for you comes down to the cheapest way to borrow the money you need over the shortest term possible with monthly repayments you can afford.

How much can I borrow?

At Asda Money, our panel of lenders offer loans from £1,000 up to £25,000. How much you can borrow will depend on your personal circumstances. Lenders will look at a range of factors when considering your loan application, including:

• Your income: Whether or not you can afford to make the monthly repayments
• Your credit score: A good credit score indicates you can borrow money responsibly and aren’t a risk to the lender
• Why you’re applying for the loan: For example, whether you’re using it to consolidate debt

Remember, when borrowing over a shorter term, your monthly repayments will be higher than a longer term loan. Use our helpful loan calculator to understand what you could potentially borrow and how the length of the loan affects the monthly repayments.

How are short term and payday loans different?

Payday loans are a type of short term loan, but they work a little differently. A short term loan is a personal loan you borrow from a lender and pay back over a defined period of time, say 12 months. You effectively spread the cost of the loan over a number of months.

A payday loan on the other hand is designed to be repaid in one lump sum with your next paycheck. Payday loans also tend to be for lower sums – usually around £1,000 or less – and the interest rates are often higher than short term loans as they are designed to be paid back in a month or less.

Alternatives to a short term loan

Before you apply for a short term loan, consider any other potential alternatives:

Credit card: If you need to borrow a smaller amount over a short period of time, a credit card may be a more suitable option. You can earn rewards when you spend on a credit card, and if you pay it back in full each month you won’t pay any interest.

Borrowing from family or friends: If you have a loved one who is willing to lend you the money you need, you won’t need to go through the process of applying for a loan. That means no credit check and no impact on your credit score. And depending on the agreement you have, you may not need to pay interest either. It’s good sense to draw up a loan agreement before you borrow the money with clarity on the amount being borrowed and the repayment term.

Saving up: If you want to borrow a smaller sum of money, it makes sense to delay your purchase and save up. Put aside the money you would have paid back each month into savings instead and you won’t go into any debt at all. You also won’t need to pay interest, making it a more cost-effective option.

We’re here to help

At Asda Money, we work with a panel of carefully selected and trusted lenders, that could provide you with a personal loan that matches your borrowing needs across a term that works for you.

We search our lender panel and list a range of offers that meet your requirements. One simple eligibility check, and you’ll get offers from some of the best UK lenders on the market. Then it’s a case of comparing and finding the right one for you before completing a full application.

We can also help you understand how to better manage your finances with our Financial Support.

Compare loans using our trusted panel of lenders today.