Which Types of Lenders Offer 12 Month Loans?

12 month loans are loans which you pay back over the course of one year. Usually you would pay your loan back in instalments on a monthly basis. This means that you’d pay 12 payments to the lender in order to clear your debt with them. These payments are normally the same amount (or at least very close to the same amount) each month, and include the loan amount plus any fees and interest. In simple terms, borrowing £1000 over one year with an APR (annual percentage rate – this includes all of the interest and fees you’d be expected to pay over the course of a year, expressed as a percentage of the loan amount) of 20%, means that you’d owe a full amount of £1200. When you split this into 12 monthly payments, you would need to repay £100 per month. Of course, this is a very simplified version, and different lenders will all have different interest amounts that you’re expected to pay, so your payments over a year could be much different to this, particularly if you’ve chosen a different amount to borrow altogether!

There are many different lenders out there who can offer loans with terms of one year. As a first port of call, your bank may be able to help you. Banks can often offer the lowest rates, but as they are more risk averse, they could turn down more people due to stricter lending criteria. If your credit history is not brilliant, then you could be forced to look at more alternative lenders in order to get the money you need. This is not a bad thing – many lenders who are considered alternative can offer products that the banks, building societies and supermarkets simply won’t lend out to many people. Here’s a rundown of the different lenders who could help you.

Guarantor Lenders

Guarantor loans require a second person to come on board with you, who will agree to pay your loan instalments if you cannot. Of course, it’s preferable that your guarantor doesn't step in at all, as that is not the point. The point is that they’re there as a safety net should something go wrong. You’ll be checked at the application stage to ensure that you’re able to afford the loan you want in order to protect everyone involved.

Logbook Lenders

Logbook loans use the value of your car as collateral, and will lend you up to 50% of the value as long as you own the vehicle outright. The APR can be pretty high with loans like this and if you don’t repay in full and on time then your vehicle could be taken from you.

Instalment Lenders

Instalment loans have higher APRs than guarantor loans, but they don’t require a guarantor in order to pay the money out to you. The point of these loans is that they offer a viable alternative to payday loans, in the fact that you don’t have to pay the full amount off within a month.

Top Tips to Keeping Up with Loan Instalments

If you’re short of cash or are looking to make a large purchase (like a new car or home improvements) then taking out a loan could prove the perfect solution to your problems. Prior to getting the loan it is likely that the lender will carry out a variety of checks to ensure that you are eligible and can comfortably afford the instalments. Providing the lender is satisfied that you meet their criteria then they’ll pay the loan out and you are then in full control of making the repayments.

While at first everything may be plain sailing, and you’re making the repayments without any problems, this can soon be thrown off by the arrival of an unexpected expense. For example, your boiler may break down or you may be hit by a hefty mobile phone bill and before you know it you've paid these and can no longer afford the repayments of you loan. Failing to pay the instalments on a loan can lead to real financial problems. It’s likely that you’ll be hit with late payment fees and charges, your credit history may also be affected if the missed payment is reported to credit reference agencies which could have an impact on your ability to get approved for credit in the future.

Throughout this article we are going to discuss how you can ensure that you keep up with your loan instalments and are never faced with the consequences of missed payments.

1. Set up a direct debit for the day after your payday

Setting up a direct debit very close to your payday is a great way to ensure that you always have sufficient funds in your account when the repayments are due. A direct debit is a payment that is automatically deducted from your account on a weekly/monthly basis, having one in place basically means that no effort is required on your part to make the payment meaning the chances of forgetting to make it is zero.

2. Create a monthly budget

If you haven’t already done so then creating a monthly budget is a great way of putting your finances in order and giving you an overview of where all your money goes. Despite what many think, budgets are in fact very simply to create and really don’t take that much time. By giving yourself a framework for your monthly spend you can also highlight any areas where you may be overspending and take the relevant action.

3. Reduce your outgoings and adjust your budget

If you’re finding that every month you are facing a struggle to make ends meet then it’s likely that your outgoings are too high. This is quite an easy problem to fix; simply take a look at your budget and highlight any areas where you feel that you may be spending too much. The first thing you should look at is you non-essential subscription; things like SKY TV, gym memberships or magazine subscriptions. Ask yourself, am I really getting the most out of these subscriptions or could I get by without them? More often than not these subscriptions simply don’t warrant their cost; cancelling them could leave you £50 to £100 better off each month – depending on how many you've got.

Once you have fully paid off the loan then you may find that there’s room in your budget to afford these non-essential subscriptions once again. However for the time being you’ll probably have to sacrifice these luxuries in the name of repaying your loan instalments.