If you’ve struggled with poor credit but need access to financing, a 12-month loan could be a solution.
These loans allow you to spread your repayments over a year, making it easier to manage your monthly budget while tackling unexpected expenses.
Why Opt for 12-Month Loans
By spreading the montly repayments over 12 months, you know in advance exactly what each months repayment will be, inclusive of interest.
No surprises! And it’ll be lower repayments than a payday loan company would require.
These are particular handy for people on reasonably tight budgets or who’d rather not be locked into repaying a loan in its entirety from the next one or two salary payments.
How much can you borrow with 12-month loans?
When you apply for a loan, lenders consider your ability to repay.
You can apply for as much you need, but that doesn’t mean you should.
Lenders get concerned about customers borrowing too much that it causes most of their income to be used up making debt repayments. It eats into living expenses. Bad times.
A better way to decide on how much to apply for is to consider how much debt you already have.
Over a year, it’s best to pay less than 36% of your income towards debt repayments. Anything higher, can be considered to be high amounts of debt.
In layman terms, if you have £20,000 income, you shouldn’t be paying more than £7,200 of those earnings to pay down debt.
Keep in mind, the 36% debt-to-income ratio includes car repayments and mortgage payments or rent payments. The essentials.
Credit cards and unsecured personal loans are higher interest finance that can chip away at your disposable income, potentially leading to reliance on borrowing.
To avoid that happening, lenders may ask you to complete an affordability assessment.
This is a breakdown of your income and the montly expenses you need to make.
Once those are paid, they need to see you have enough to afford the loan repayments, and still have enough money left to live on.
Eligibility Criteria for 12-Month Loans in the UK
In the UK, qualifying for a 12-month loan typically requires you to meet some basic eligibility criteria.
You’ll need to be at least 18 years old, a UK resident, and have a valid bank account.
Lenders will usually perform a credit check as part of the process, but some will consider applications from those with poor credit history by focusing on your income and ability to repay.
Benefits and Drawbacks of 12-Month Loans
Before accepting a credit agreement, it’s important to weigh both the advantages and disadvantages.
| Advantages | Drawbacks |
|---|---|
| Manageable Repayment Periods: Repayments over a longer period lowers the monthly repayments |
Higher Interest Rates: Borrowers with bad credit often face higher interest rates, increasing costs. |
| Fixed Interest Rates: Monthly payments remain consistent throughout the loan term. | Common Pitfalls: Over-borrowing or missed payments can result in additional fees and harm your credit score. |
When a 12-Month Loan is Suitable
A 12-month loan can be a good option if you’re facing a one-off emergency expense, like car repairs or vet bills, and need more time to repay than quick loans or fast loans allow.
However, a different loan or financial product may be more appropriate if your financial needs are long-term or ongoing.
How to Apply for a 12-Month Loan in the UK
Applying for a 12-month loan can be straightforward, but it’s important to understand the process and prepare the necessary documentation in advance.
Knowing what to expect will help increase your chances of approval and make the process smoother
Step-by-Step Guide to the Application Process
- Find a lender: Compare different loan providers that offer 12-month loans to find one that fits your needs.
- Complete the application: You’ll need to provide personal information, proof of income, and other details during the application process.
- Submit the application: Once you’ve completed the form, submit it online or in person. Some lenders may offer instant decisions, while others may take longer.
- Approval and funding: If approved, you’ll receive the funds, usually within 24 hours.
Necessary Documentation and Information
When applying, you’ll typically need to provide:
- Proof of identity (passport or driving licence).
- Proof of income (payslips or bank statements).
- Details of your UK bank account for receiving funds and making repayments.
Tips for Increasing Your Approval Chances
If you have poor credit, there are steps you can take to improve your chances of getting approved:
- Ensure your income is steady and sufficient to cover repayments.
- If yours isn’t, it can help to ask a friend or family member to help you get a 12-month guarantor loan.
- Consider borrowing a smaller amount to demonstrate affordability.
- Provide accurate and up-to-date information to avoid delays in the process.
- Know and Understand the Terms and Conditions
Pay attention to the loan term lengths, interest rates, repayment schedules, and any fees associated with late repayment or missed payments.
Make sure the loan fits within your budget to avoid financial strain.
- Using a Credit Broker to Compare Loan Providers
Credit brokers often have a panel of lenders, and can help you quickly compare the loan options available, based on your credit profile.
This can save time and help you find the best deal available.
- Always borrow responsibly
While a 12-month loan can help you manage short-term financial needs, it’s essential to borrow responsibly and have a clear plan for repayment.
Part of the loan application process involves checks for responsible borrowing.
Think carefully about your ability to repay within the loan term, because that’s what lenders check.
- Avoiding the Debt Cycle
It’s easy to fall into a debt cycle if you’re using loans to cover ongoing expenses.
To avoid this, only use a 12-month loan for one-off needs, and avoid taking out additional loans to cover existing debts.
If you find yourself relying on loans regularly, seek financial advice.
There are several resources in the UK where you can get free financial advice, such as Citizens Advice, StepChange, or National Debtline.
These organisations can help you manage debt, create a budget, and explore alternative financial options if you’re struggling.
Frequently Asked Questions
Can I get a 12-month loan with bad credit?
Yes, many lenders offer 12-month loans to people with bad credit.
The only requirement is that you can demonstrate your ability to repay.
Do I need a guarantor for a 12-month loan?
Most 12-month loans do not require a guarantor, but it depends on the lender and your credit history.
Some lenders may offer a guarantor loan option if your credit score is very poor.
How fast can I get a 12-month loan?
Many lenders offer same day loans, meaning you could receive the funds within 24 hours if your application is approved by late afternoon. This is common with fast loans or quick loans.
Can I repay my 12-month loan early?
Most lenders allow early repayment, and some may even reduce the overall interest. Be sure to check your loan’s terms and conditions for any potential early repayment fees.
Is a credit check required for a 12-month loan?
Yes, most lenders will perform at minimum a soft credit check as part of their assessment.
However, some lenders may be more flexible for those with poor credit, focusing on your income and ability to repay.
