12-month loan guide: How to get a 1-year loan today

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If you’re looking to take out a 12-month loan, you might be wondering whether it’s a good way to borrow, or where there are ways to improve your chances of getting approved.

In this guide, we’ll explore all there is to know about 1-year loans and how to apply, so that you can make a decision in confidence.

First, let’s cover the basics—what is it?

What is a 12-month loan?

When you take out a loan, you will be presented with a repayment plan that will span a number of months, or—in many cases—years.

This is referred to as the loan term. In other words, the length of time over which the loan will be paid off, along with any interest, in monthly repayments.

A 12-month loan is therefore a loan with a term of 12 months, or 1 year. This means that, providing you stick to the repayment plan, the loan will have been repaid after a year.

How does a 12-month loan work?

Considering that loans are available with terms as long as 30 years, a 12-month loan is a relatively short-term loan by comparison.

This means that you will be spreading the repayments over a shorter period of time, making the amount you repay each month slightly higher.

Say you take out a loan of £1,000, for example.

Here’s how that would look over a 12-month period with a typical representative APR:

  • Amount borrowed: £1,000
  • APR (Annual Percentage Rate, the interest rate): 19.7%
  • Total repayable amount: £1,100.83
  • Monthly repayment: £91.74
  • Amount the loan will cost you: £100.83

For comparison, here’s what that same borrowing scenario would look like when spread out over a longer 3-year period:

  • Amount borrowed: £1,000
  • APR (Annual Percentage Rate, the interest rate): 19.7%
  • Total repayable amount: £1,303.60
  • Monthly repayment: £36.21
  • Amount the loan will cost you: £303.60

As you can see, borrowing over 1 year means higher monthly repayments, but the total amount of interest you pay at the end is less. In addition to this, the debt will be repaid more quickly, which may provide extra peace of mind.

On the other hand, a longer-term loan would allow for more affordable repayments each month, despite resulting in a higher amount repaid overall. It’s up to you to decide which works best for your needs, financial circumstances, and preferences.

How much can I borrow with a 1-year loan?

With a 12-month personal loan, you can typically borrow anything from £500 up to £35,000.

These loans are unsecured, meaning they are not tied to any other assets, like your home. As a result, lenders will base their decision on factors like your income and your credit history.

The amount you are eligible to borrow will ultimately come down to whether you can afford the monthly repayments and the lender’s confidence in your ability to repay.

What can I use a 12-month loan for?

Short-term loans can be a great way to spread the cost of a large purchase over a few months. Here are some of the most common ways a 12-month loan can be used.

12-month car loan

If you know you want to own a car outright and would prefer not to get it through car finance, a 12-month car loan would allow you to repay the debt over a few months.

This can be ideal if you can afford the higher payments and don’t want the debt sitting with you for years to come.

To learn more about car finance options, you can read our guide to car finance.

12-month wedding loan

Weddings can be expensive, with the average cost creeping up every year.

As a result, it’s becoming increasingly common for betrothed couples to take out a loan to cover the costs, taking a weight off their minds with one less thing to worry about.

With a 12-month wedding loan, you could avoid the stress of needing to have saved in advance of the wedding and spread the cost over a number of months instead.

To learn more about borrowing for your big day, you can read our guide to wedding loans.

12-month debt consolidation loan

If you have multiple existing debts and find they can be difficult to stay on top of, a 12-month debt consolidation loan may give you some welcome breathing room.

By consolidating your existing debts into a single monthly repayment, you’ll only have one to keep track of and repay.

Of course it’s worth noting that, if you spread the debts out over a longer term, a debt consolidation loan may result in paying more overall than if you had repaid the existing debts separately. However, if your current debts have a high APR, you may find that you can get a better rate through debt consolidation. As always, it’s best to explore your options before making a decision.

If you’d like to learn more about consolidating debt, you can read our guide to debt consolidation.

How much will a 12-month loan cost?

The table below provides a rough guide of the amount a 12-month loan will cost you, depending on the amount borrowed and with an example APR of 25.4%.


Amount borrowed

Repayment term

APR (example rate)

Monthly repayments

Total repayment


12 months(1 year)





12 months (1 year)





12 months (1 year)





12 months (1 year)





12 months (1 year)





12 months (1 year)





12 months (1 year)





12 months (1 year)





12 months (1 year)




£25,000 12 months (1 year) 25.4% £2,350.08 £28,200.99

36.8% APR Representative (fixed)

Representative example: 36.8% APR Representative based on a loan of £12,500 repayable over 48 months at an interest rate of 36.8% pa (fixed). Monthly repayment of £500.83. Total amount repayable is £24,039.67.

 Aro is a credit broker, not a lender.

Advantages and disadvantages of 1-year loans

Let’s dig into some of the benefits and key considerations when it comes to borrowing over a 12-month period.

12-month loan advantages

  • Quick access to cash, with plenty of options for how you’d like to borrow
  • You will pay less interest with a short-term loan, even if the rates are slightly higher, meaning the total amount you repay on top of the original amount borrowed will be lower
  • You won’t be tied to making repayments for a number of years

12-month loan disadvantages

  • Your monthly repayments will be higher, as you are spreading the debt over fewer months and many short-term loans will have a higher interest rate
  • You might be limited in the amount you can borrow, depending on your circumstances
  • Missing repayments with any type of loan can damage your credit score, so you should only borrow what you can afford to repay over a realistic term

Who is eligible for a 12-month loan?

Loan eligibility criteria will vary between lenders, but some common factors they will usually check include:

  • The amount you’re looking to borrow
  • Your income
  • Any existing debts (also known as your “debt-to-income ratio”)
  • Your credit history

If you can demonstrate that you can afford the monthly repayments and you show a track record of reliable borrowing, indicated by a healthy credit score, you are likely to be approved.

Is a 1-year loan right for me?

When it comes to borrowing, there is no single “best” option.

Instead, it will come down to what makes the most sense for your needs and circumstances.

To help you weigh things up, here are some things to ask yourself while you consider your options:

  • Would you prefer to pay more each month, but pay less in total?
  • Can you see yourself making monthly payments over the next year?
  • Is your income stable for the foreseeable future, and do you have a backup source of income that can cover the repayments in the event that something changes?

If you answered yes to the questions above, then it’s a sign that a 12-month loan might be the right solution for your needs.

If you’re still unsure, it might be worth considering some of the alternatives to a 12-month loan.

12-month loan alternatives

A personal loan isn’t your only option when it comes to borrowing over a 12-month period.

Here are some of the other borrowing methods available to you, any of which could be more suitable to your needs or circumstances.

Credit card

A credit card is a popular way to borrow small amounts over a short period, with more flexible repayment options than a personal loan.

With a credit card, you will have an approved credit limit, which is the total amount you can spend on the card at any time.

Any money you spend on the card is effectively borrowed from the card provider, and will then need to be repaid over time.

The difference with a credit card is that, unlike the strict repayment plan of a personal loan, you have a minimum repayment that must be made each month. This is usually a percentage of the total amount owed. You’re free to repay as much of the debt as you like, providing you pay the minimum amount.

It’s worth noting that a credit card provider will usually apply interest to any remaining balance, apart from special cases like 0% purchase cards. These cards come with a fixed 0% interest period, making them a great alternative to consider, as you can spread the cost of a big purchase across the 0% window, without paying interest. Once the 0% period ends, the card’s usual rate will apply.

When using a credit card, it’s a good idea to keep your credit utilisation below 30%. So if you have a credit limit of £3,000, aim to keep the amount owed below £1,000 to demonstrate responsible borrowing and boost your credit score.

Car finance

If you’re looking to buy a car, or a caravan, then a personal loan isn’t the only option available to you.

There are a range of car finance options out there, like hire purchase (HP) and personal contract purchase (PCP), to name two examples.

Car finance could be preferable if you’re not sure whether you’d like to own the car outright and would like some flexibility to choose.

If you’d like to learn more about car finance, you can read our guide covering the options for financing a car.


An overdraft is an agreement with your bank, which allows you to spend more money than you have available in your account.

With an agreed overdraft of £1,000, for example, your bank would allow you to spend money beyond an account balance of £0, providing it was within the agreed limit.

If you reach the overdraft limit, the bank may decline any further payments until some of the overdraft has been repaid.

It’s important to know that your bank will charge interest on any overdrawn balance. It used to be the case that unarranged overdraft usage would charge higher interest rates, for going beyond the agreed overdraft amount. Since April 2020 however, this has switched to a simple annual interest rate, regardless of whether the overdraft is arranged or unarranged.

If you simply need extra cash flow to make ends meet or cover an unexpected expense, an overdraft or credit card might be a flexible alternative to consider.

How to get a 12-month loan

If you’re ready to find a 12-month loan, it’s simply a case of browsing the options, selecting a lender, and making your application.

We’ll outline how to approach each of these steps, as well as what happens next, in the sections below.

How to choose a 12-month loan

Finding your ideal loan is all about browsing the options available on the market.

Of course, with so many lenders out there, it can be difficult to know where to start. This is where we come in.

As a broker, we have access to a vast panel of lenders, catering to a wide variety of circumstances, loan terms, and borrowing purposes.

To get started exploring your 12-month borrowing options, you can head over to our free tool to check your eligibility. Simply enter a few details about yourself and what you’re looking for. We’ll then run what’s known as a soft search on your credit history, meaning that it won’t appear on your credit report.

This helps us to suggest lenders that are suitable to your needs and more likely to approve your loan application.

How to apply for a 12-month loan

To apply for a loan, you’ll need to provide a few personal details about yourself, which may include:

  • Your name and address
  • Your income
  • Additional details about your background and personal circumstances

The good news is that, if you’ve used our free loan eligibility checker, you’ll have already provided most of this information, so making your application will just take a few clicks.

How can I increase my chances of getting approved for a 12-month loan?

What can you do to increase your chances of approval. outside of taking gradual steps to boost your credit score?

Exploring the market and choosing a loan wisely, without rushing into an application with the first lender you find, is one of the best things you can do to improve your approval chances.

This means taking time to explore your options, understanding your credit history, and considering what is realistic for your needs and financial situation.

Thankfully, with tools like our eligibility checker it’s easy to make an informed decision.

When will I receive my loan if approved?

With an unsecured personal loan, it’s common for the loan to be processed fairly quickly, it could even be transferred on the same day.

What happens next?

Once you have accepted the terms of the loan agreement and received the funds, you will be required to stick to the repayment schedule over the 12-month loan term.

Once the 12 months are up, providing you have made the required repayments (including any interest), the debt will be repaid and your account will be closed.

If you decide you want to repay the loan early, this will typically be possible, but your lender may apply an early repayment charge.

12-month loan FAQs

Looking for further guidance? Find answers to some of the most common questions about 1-year loans below.

Can I get a 12-month loan with bad credit?

Even if your credit score is lower than you would like it to be, it doesn’t necessarily mean you won’t be able to borrow.

In some cases, it may simply be that you need to find a lender that caters for applicants with low credit scores. This is where tools like our free loan eligibility checker can help.

Can I get a 12-month with no guarantor?

Lenders may ask you to provide a guarantor before they lend any money, if your credit rating is lower than their eligibility criteria requires.

A guarantor is someone who is jointly accountable for your debt, meaning they will be required to make repayments if you can’t. Because of this, your guarantor should be someone who trusts you and is willing to put their own credit history forward to increase your chances of approval.

While guarantors aren’t always required by any means, they may be necessary in certain circumstances. This will ultimately depend on the lender and their own criteria.

Can I get a 12-month loan with no credit check?

Borrowing of any form in the UK will always require some degree of credit check, as well as appearing on your credit report.

However, rather than making multiple blind applications for loans in a short timeframe— which would appear on your credit report as a red flag—there is a better way. By using a soft search tool, like our loan eligibility check form, you can browse your options and pick a suitable lender, without impacting your credit score.

Ready to find your ideal 12-month loan?

Are you ready to start exploring your 12-month loan options?

Head to our free loan eligibility checker to start your search and find the lenders most suitable to you, for borrowing over a 1-year period.

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