With a short term loan, you pay back the amount borrowed over a shorter period.
Typically, a short term loan is between 6 months to a year, but term lengths will vary among different finance providers.
Short term loans are usually more cost-effective as you pay less interest.
Let’s say you’re looking to borrow £12,000 with an 8% interest APR.
With a 12-month contract, you’ll pay 12 monthly payments of £1,042 and your total amount payable will be £12,508.
So, your loan will cost you £507.
Now let’s say you opt for a 36 month contact instead.
Extending your repayment period will lower your monthly payments, but you’ll pay more interest.
As a result, your total amount payable will be £13,482. You’ll pay 36 monthly payments of £374 and the cost of your loan will be £1,482.
With a short term loan, you could save hundreds of pounds in interest.
Your car is also likely to have a higher resale value at the end of a short term agreement, as all vehicles depreciate more overtime.
This could be a big advantage if you want to sell your car on at the end of the agreement or replace it with a newer model.
Whilst short term loans can save you money in the long run, a shorter repayment period is likely to increase your monthly cost.
The other disadvantage to short term loans, is they’re usually only available to individuals with a strong Credit Rating.
Typically, car finance agreements range between 24-48 months but at Creditplus we provide 12-month loans, subject to approval.
To check your eligibility for short term car finance, simply complete our 2 minute, no-obligation Application Form.
Check your eligibility for a short term loan, without affecting your credit score.