A year is a long time in a household budget. A 12 month loan keeps each payment smaller than a 3 or 6 month term, but the repayments will run through a winter, a Christmas and probably an insurance renewal. This page compares 12 months with the terms either side, explains why the 12 month mark matters for your protections, and shows how to plan a year of payments. Dot Dot Loans is a credit broker, not a lender.
12 months against 6 and 18
Moving from 6 months to 12 cuts the payment by £84.15 a month but nearly doubles the interest. Moving from 12 to 18 lowers it by another £27.09 and adds £210.24 in interest.
For other amounts, 12 months at the representative rate works out at £34.89 a month on £300 (£418.68 in total), £58.16 on £500 (£697.92) and £232.63 on £2,000 (£2,791.56). In our application data, 12 months was the fourth most popular term, behind 3 months (28.3%), 6 months (21.0%) and 24 months (20.8%).
Representative Example: Borrow £1,000 over 18 months. 18 monthly repayments of £89.22. Total amount repayable: £1,605.96. Interest: £605.96. Annual interest rate: 59.97% (fixed). Subject to application approval by the lender. Not all lenders offer loans up to £5,000. Representative APR 79.5% (Variable). Any representative monthly repayment shown is for illustration only, based on our representative APR. Your actual repayments will be confirmed by the matching lender if your application is approved.
Why the 12 month mark matters
High-cost short-term credit is a loan with an APR of 100% or more that is due to be repaid, or mostly repaid, within 12 months. If your 12 month loan meets that definition, the FCA price cap applies: interest and fees of no more than 0.8% a day, default fees of no more than £15, and total charges that can never exceed the amount borrowed.
A loan with a high APR that runs for longer than 12 months generally falls outside that definition, so the cap does not protect you. If you are offered a high APR over a longer term, look closely at the total amount repayable.
Planning a year of repayments
- Mark the months where your costs rise, such as winter energy bills, Christmas, school uniforms, and annual renewals for car insurance or tax.
- Set the payment date just after payday, and watch the months when you are paid early because of a bank holiday.
- Keep a small buffer in your account, so one large bill does not turn into a missed payment.
- If your circumstances change, tell the lender early. Lenders must treat customers in financial difficulty with forbearance, which can mean more time to pay or a reduced payment plan.
Who a 12 month loan suits
A 12 month term suits a cost that is too large to clear in a few months on your income, but not so large that it needs spreading over years. It suits less well if you already know your income will fall during the year, or if you would only manage the payments by cutting back on essentials.
- 6 month loans: the protections on shorter loans
- Long term loans: what changes when repayments run for years
- £1,000 loans: the representative example explained line by line