Three-Month vs. 12-Month Loans

If you are looking to take out a loan, there are many options and lengths of time for which you can borrow money in the UK. There are places you can borrow from, including banks and high-street lenders, as well as online loan providers and loan connection services.

There are different types of short-term loans that borrowers may consider, such as three-month loans and longer-term loans like 12-month loans. However, deciding which loan is fit for you can seem confusing. The more you can learn about short-term and long-term loans, the more you can start to make a more informed decision and understand which type of loan is right for you.

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One of the most popular short-term loan lengths is three months. Three-month loans are typically used for financial emergencies, such as car repairs and unexpected bills. In addition, short-term, three-month loans are typically borrowed in smaller amounts.

One of the main perks of these types of loans is that they allow borrowers to access money quickly, allowing them to address their financial emergencies faster. However, keep in mind that these short-term loans typically come with higher interest rates. As such, make sure you calculate your finances to ensure you can repay the loan in full.

What Are Short-Term Loans Used For?

Due to the short-term nature of three-month loans, they are most often used for unexpected emergencies that crop up between pay periods. These unforeseen circumstances may include home renovations, medical bills, or vehicle repairs.

Typically, short-term loans can be used for various purposes. However, check with the lender what the loan can be used for before signing an agreement. Also, keep in mind that short-term loans should only be used for dire emergencies where you have no other options.

What Are the Advantages and Disadvantages Of Three-Month Loans?

The Benefits of Three-Month Loans

The Disadvantages of Three-Month Loans

  • Repayments are shorter

  • Can receive money faster

  • Suitable for financial emergencies

  • Highly regulated by the FCA

  • Typically have higher interest rates

  • Fees may apply

  • Smaller amount of money to borrow

  • Penalties apply for missed payments

What Is a Long-Term Loan?

As the name implies, a long-term loan is borrowed for a longer period than a short-term loan. A popular long-term loan is a 12-month loan, which may allow you to borrow larger sums of money. Long-term loans are personal loans, which can be used for house repairs, home, car repairs, and bills.


However, like short-term loans, 12-month loans should only be used for financial emergencies. Using high-interest loans for everyday expenses can lead to a cycle of debt.

What Are Long-Term Loans Typically Used For?

Twelve-month loans can be used for any personal reason. As the money is paid back over a longer period than a short-term loan, it can be used for any ongoing factors like home renovations, vehicle repairs, or even financing.

Unlike three-month loans, a 12-month loan can be useful if you’d like additional financial help over a longer period for something that requires a larger amount of money.

What Are the Advantages and Disadvantages of Long-Term Loans?

The Pros of 12-Month Loans

The Cons of 12-Month Loans

  • Repayments are over a longer period

  • You can borrow a larger amount

  • Suitable for financial emergencies

  • Highly regulated by the FCA

  • Committed to repayments and debt for a longer period

  • Interest over a longer period can add up

  • Missed repayments can lead to penalties

  • May carry fees

Three-Month vs. 12-Month Loans: Which Is Best For Me?

Having read our guide about short-term versus long-term loans, you should hopefully by now have a clearer idea about these types of loans and how they work.

Taking out a loan, whether it be a three-month loan or a 12-month loan, is a decision that shouldn’t be taken lightly. It is important to keep in mind that while both types of loans offer their advantages and disadvantages, both must be repaid accordingly and not doing so can lead to further debt.

Author Maggie Clarke
Maggie Clarke Content Ops Lead
Maggie leads the content operations team at She is an expert on personal finance, by way of a lifetime of gathering practical knowledge on what to not do with your pocketbook. When not blogging about money, Maggie can be found rambling through the roughest terrains. She considers herself charming yet troublesome and would love to meet you someday, just not today.
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