In the face of financial instability, knowing exactly what options are available to you to help manage your finances is key. During the present outbreak of COVID-19, many members of our community are facing both new financial challenges as well as reoccurring ones. This can include debt, decreased income and increased expenditure on essentials. In this piece, we explore whether a short term loan may alleviate some of the pressure.

What are Short Term Loans?

Short term loans are small loans of money offered to individuals with a shorter repayment time of up to 12 months. These type of loans are not the same as bank loans – they often come with a higher APR and are usually lower amounts, typically ranging between £50 – £2,000.

What are Short Term Loans typically used for?

Short term loans are typically used for those who find themselves in the midst of sudden expenses they may not be able to pay immediately. These types of loans are also helpful for those with multiple paydays, or those who do not work regularly to pay off regular expenses, bills and direct debits they owe. 

It is common for people to take out short term loans to cover large unexpected expenses like: 

  • Car repairs
  • Replacement of household appliances 
  • Medical bills
  • Unexpected debt

Short-term loans can also provide  more time to figure things out if there is a sudden drop in income — much like people in the service and airline industry are experiencing right now.

What are the advantages of Short Term Loans? Disadvantages?


  • Short term loans are unsecured, meaning you aren’t borrowing against something you already own and your items will not be repossessed should you fail to pay back the loan.
  • This kind of loan can improve your credit rating if you repay the loan on time within a few months.
  • Short term loans often have fast approval and lower interest in the long run – if you need quick access to money, an application can be approved within hours, and the shorter period means you pay less interest in the long run.


  • Short term loans can be high-cost with high interest rates and high monthly payments. This means if you repeatedly use short term loans, you may pay a significantly higher amount in interest every month in comparison to a longer term loan. 
  • In the same way that short term loans can help you build your credit score, they can also have a negative impact on your credit score if you fail to repay it on time.
  • Short term loans can encourage a cycle of borrowing. This may be detrimental if you do not strive towards a level of financial stability through budgeting and planning.

What are the Best Short Term Loans for People with Bad Credit?

Whilst there are a number of loan providers in the UK, we’ve put together our top three to look into. If you have a poor credit history, the best short term loans have the following qualities:

  • Verified provider: The best short term loans for people with a poor credit history are providers registered with the FCA (Financial Conduct Authority). 
  • Personal/ unsecured: Short term loans which are personal/ unsecured means you will not need to put up assets as collateral.
  • Competitive APR: Ensuring that the interest rate and repayment terms are as favourable as possible will ensure that if you are trying to mend your credit score, you won’t get caught out by high interest payments.

How Do You Calculate Interest on Short Term Loans?

The interest on a short term loan is a calculation of the amount you will pay for the loan over a course of the time you use the amount. Fortunately, calculating short term loans is pretty straightforward. Here is a list of free online resources:

Portify – Build Healthy Credit

If you are looking for more ways to improve your credit score to get an overdraft look into using a credit building service like Portify. If you are new to the UK, have previous financial difficulties or, have a bad credit score, Portify can help. Portify offers a simple and easy way to build your credit score with Experian, Equifax and TransUnion. Join a community of 100,000+ members who have seen their scores improve by up to 100 points in just three months. We work with all major UK Credit Reference Agencies to build your credit score.



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