Short Term Loans

Can I get a short-term loan?

My Community Finance works with credit unions that provide ethical, affordable loans. To be eligible for a loan from one of our partner credit unions, you will need to:

• Be between the ages of 21 and 65

• Be employed and earn £18,000 a year or more

• Live in the UK (excluding Northern Ireland, the Channel Islands and the Isle of Man)

Like with any loan, your likelihood of being approved for a short-term loan from one of the credit unions we work with will depend on the results of the affordability and credit checks performed when you apply. 

Credit unions are not-for-profit organisations; this means that any profits made through interest on lending are returned to members in the form of interest on savings or reinvested back into the credit union to improve its services for its members. 

In addition, to be approved for a short-term loan from one of the credit unions we work with, you’ll need to meet the membership requirements which can vary between credit unions. The credit unions we work with accept members from almost all fields of employment and members of various organisations such as the Co-Op or the National Trust. 

When you apply for a short-term loan via My Community Finance, we’ll match you with the credit union that suits your personal circumstances.

What’s considered a short-term loan?

Typically, lenders define a short-term loan as one that must be paid back within a year. However, the credit unions we collaborate with provide loan options with repayment periods ranging from 12 to 60 months.

When you apply for a loan with one of our partner credit unions, you’ll get to choose how many months it will take you to repay what you owe. The credit unions we collaborate with provide loan options with repayment periods ranging from 12 to 60 months. So if you’re looking for a short-term personal loan, you could choose a 12-month loan term.

Which is better, long-term or short-term loans?

Whether a long or short-term loan will be better for you will depend on your personal circumstances, how much you can afford to repay each month, and what you intend to use the loan for. 

Typically borrowers use short-term loans for emergencies like fixing broken boilers or car repairs. 

In contrast, long-term loans are typically used to spread the cost of large purchases, fund home improvement projects or consolidate high-interest debts.

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

In general, short-term loans are used for borrowing smaller amounts of money. The amount you’ll be able to borrow will depend on your loan term and how much you can afford to repay each month. 

Opting for a shorter borrowing period will lead to higher monthly payments; if you need to borrow a significant sum of money, it may be beneficial to extend the repayment duration to avoid any financial strain. By doing so, you can be sure that you won’t overextend yourself financially.

The credit unions we work with offer short-term personal loans between £1,500 and £25,000 over 12 - 60 months. 

How much will a short-term loan cost?

The cost of a short-term loan will vary depending on how much you borrow, how long you borrow for and your interest rate. 

Upon submitting an application for a short-term loan through our partner credit unions via our online portal, you’ll be required to determine how much you’d like to borrow and the duration of repayment.

If you choose to borrow for a shorter duration, the total cost of borrowing will likely be lower because your loan will have less time to gather interest compared to a loan with a longer repayment period, even if the borrowed amount is the same.

However, the shorter your loan term, the higher your monthly repayments will be. 

It’s important to carefully consider what’s best for your financial situation; don’t borrow over a shorter period to lower the overall cost of borrowing if it means you won’t be able to keep up with your repayments. 

The interest rate of a loan is a critical aspect in determining the overall cost. Upon submitting an application for a short-term loan through our partner credit unions, you will be provided with a personalised interest rate based on your unique financial circumstances.

If you want to get an idea of the overall cost or monthly repayments on a short-term loan, you can use our loan calculator. 

It’s important to note that the calculator uses a representative APR, which gives an indication of how much interest a typical borrower will pay. The actual cost of your loan could be higher or lower than the example given by the calculator. 

What are the pros and cons of a short-term loan?

Applying for a loan isn’t a decision to be taken lightly - it’s important to think about the advantages and disadvantages in order to find the best short-term loan for you. Here are some of the pros and cons of short-term loans:

Pros:

• Useful in financial emergencies, like helping you to cover or spread the cost of urgent repairs to your property or a vehicle. 

• Fixed monthly repayments - your interest rate won’t rise during your loan term.

• Lower overall cost - short-term loans tend to gather less interest than loans spread over a longer period.

Cons:

• Higher monthly repayments - borrowing over a shorter period will normally mean your repayments are higher than if you borrowed the same amount over a longer period.

• Not ideal for borrowing large amounts - borrowing a large amount over a short period may make your monthly repayments unaffordable.

• If you don’t keep up with your repayments, a loan may harm your credit score and make borrowing more difficult in the future. 

Will a short-term loan hurt my credit score?

As with any form of credit, failure to meet your repayments for a short-term loan could negatively affect your credit score.

On the other hand, by making sure you make your monthly repayments promptly, and in full, you can enhance your credit rating since it signifies that you are a reliable borrower. 

Can I pay my short-term loan back early?

With a short-term loan from one of our partner credit unions, you will be able to make early repayments or pay back the loan in full before the end of your loan term. 

However, the credit unions may charge you additional fees if you do decide to pay your loan back early. You can repay your loan fully without incurring any fees if you do this within 14 days of the day you received the loan agreement.

Why are short-term loans considered to be bad?

In the past, short-term loans have been associated with high-interest loan products like payday loans, which up until 2015 did not have capped interest rates, and led borrowers to get into debt they couldn’t afford to repay. 

All the credit unions we work with are responsible lenders, and hold the relevant permissions authorised and regulated by the Financial Conduct Authority and by the Prudential Regulation Authority.