What is a short-term loan?

A short-term loan is a quick way to borrow a smaller amount of cash than some other loans allow, typically over 6-18 months. It can be ideal for covering unexpected expenses - everything from garage bills to dental care or urgent home repairs. Unlike payday loans, which typically require full repayment from your next paycheck or within a few months, short-term loans let you spread repayments over a longer period, potentially making them more manageable.

Lenders often charge higher interest rates for short-term loans than standard personal loans. That said, if you repay on time, the overall cost may be lower compared to longer-term borrowing.

Short-term loans can be a helpful financial tool when used responsibly. They offer flexibility and quick access to funds, which can be crucial in emergencies. Just be sure to compare offers and understand the terms before committing, ensuring the loan fits your needs and repayment capacity.

Are you eligible for a short-term loan?

If you're thinking about applying for a short-term loan, you might be wondering what lenders usually look for during the application process. While exact requirements vary between providers, here’s what you may need to qualify:

  • Age and residency: You must be at least 18.

  • Banking: You must have a UK bank account with a valid debit card, to help verify your financial situation, and sometimes because repayments are collected via Continuous Payment Authority (CPA).

  • Income: Lenders may require you to prove a regular income from employment, though self-employment may also be considered. Lenders may also accept benefits as a form of income for a short-term loan. The key is proving you can afford the repayments.

  • Expenses: They’ll want to ensure you can afford the loan repayments each month.

  • Credit history: A good credit history can make a big difference. Lenders will typically require you not to be bankrupt or on an Individual Voluntary Arrangement (IVA). If you have a poor credit score or don’t yet have a credit history, you may find the rate you are offered is higher than a standard personal loan.

Just keep in mind, late repayments can lead to bigger financial headaches, so always be sure you can comfortably keep up with repayments.

How much can I borrow with a short-term loan?

How much you can borrow depends on the lender’s loan limits, your income, credit history, and how affordable the repayments will be for you. But as an example, one leading lender lets you borrow between £500 to £5,000 over a period of 6-18 months with a short-term loan. Another offers loans of up to £800 over a period of 6-12 months to first time customers with income from benefits including Universal Credit, Disability Living Allowance and Child Benefit.

Lenders will look at a few factors when deciding how much to offer you. At the very least, this is likely to include your income, including whether it's regular and stable, your monthly outgoings and your credit score (the better it is, the more you might be offered).

As always, it’s usually considered smart to only borrow what you need, and to make sure you can manage the repayments comfortably.

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Page updated on 16th October 2025, Reviewed by Richard Groom