pixel

Short-Term Loans for Bad Credit

What “short-term” means and how these loans fit within responsible borrowing

The term short-term loan often causes confusion, especially for people with bad credit. It does not describe a separate product type. It describes how long repayments are spread over.

This page explains:

  • what “short-term” means in bad credit lending
  • how these loans differ from payday lending
  • how affordability is assessed
  • when a short-term loan may not be suitable

For a full overview of eligibility, costs, credit checks, and safeguards, start with our main page on bad credit loans in the UK.

What does “short-term” mean in bad credit lending?

In the context of bad credit loans, “short-term” refers to the repayment period, not speed or urgency.

Typically, this means:

  • borrowing repaid over several months, not weeks
  • fixed monthly repayments
  • a clear end date for the agreement

Short-term loans are designed to avoid long-term debt commitments, but they still require careful consideration to ensure repayments are affordable.

Short-term loans vs payday loans

Short-term loans for bad credit are not the same as payday loans, even though the terms are sometimes confused.

Key differences include:

  • repayments are spread across monthly instalments, not due in one lump sum
  • borrowing is assessed based on affordability, not just income
  • repayment periods are longer than traditional payday lending

The focus is on manageable repayment, not quick turnover of borrowing.

How much can be borrowed and for how long?

As part of our bad credit loans offering:

  • loan amounts typically range from £300 to £1,500
  • repayment terms usually range from 3 to 9 months

The exact amount and term depend on individual circumstances and affordability. Borrowing more or over a shorter period increases repayment pressure and may not be suitable for everyone.

How affordability is assessed

Under UK lending rules, lenders must assess whether repayments can be made without causing financial harm.

This involves reviewing:

  • income and essential living costs
  • existing credit commitments
  • whether repayments are sustainable for the full loan term

Affordability assessments apply to all short-term bad credit loans, regardless of credit history.

FCA rules and responsible lending

The Financial Conduct Authority requires lenders to carry out a reasonable and proportionate creditworthiness and affordability assessment before offering credit. This requirement is set out in the FCA Consumer Credit Sourcebook (CONC), including CONC 5.2A.

These rules require lenders to:

  • base decisions on sufficient, reliable information
  • assess the customer’s ability to repay sustainably
  • avoid lending that could cause financial harm

You can read the FCA guidance here: https://www.handbook.fca.org.uk/handbook/CONC/5/2A.html

These requirements apply to all bad credit loan applications, including those described as short-term.

When a short-term loan may not be suitable

A short-term loan may not be appropriate if:

  • repayments would leave you short for essential living costs
  • you are already struggling with multiple debts
  • borrowing would be used to cover ongoing financial shortfalls

Shorter repayment periods can increase monthly repayment amounts, which may increase financial pressure rather than relieve it.

Alternatives to consider

Before taking out a short-term loan, you may wish to consider:

  • speaking with creditors about payment arrangements
  • seeking free, independent debt advice
  • reviewing your budget to identify non-credit solutions

In some situations, avoiding new borrowing altogether may be the safest option.

How this fits within bad credit loans

Short-term loans are one way bad credit loans may be structured, but they are not a separate category.

All applications are assessed under the same responsible lending standards explained on our main bad credit loans in the UK page, which covers:

  • eligibility and checks
  • costs and risks
  • early repayment rights
  • what happens if a loan is declined

Your next step

If you’re considering a short-term repayment period and want to understand whether borrowing may be suitable, the best place to start is our main page on bad credit loans in the UK.

There you can review all the information you need before deciding whether to check your eligibility.

Important reminder: Late repayment can cause serious money problems. For help, go to moneyhelper.org.uk.