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How to choose the right short-term loan

What are short-term loans?

A short-term loan is a loan that is offered for a short repayment cycle. What time period is meant by "short-term" can vary greatly from lender to lender and based on the loan's purpose. A payday loan lasting one week is just as much a short-term loan as an instalment one that lasts three months. These loans are short-term in comparison to other sorts of loans like business loans lasting one fiscal year, or mortgage and car financing, which can last decades.

How do short-term loans work?

Applying and getting approved for a short-term loan is generally easier than applying for a long-term loan because the amounts are often much smaller, around £100 to £1000, making for less risk on the lender's part. However, because the amounts are too small and are generally just quick cash, there is no collateral, meaning that there is nothing backing up your loan but good faith in you as a borrower. Should you fail to repay on time you may face negative consequences, such as fees or a lowered credit score.

Something else to consider is that although APR will be listed on every lender's website by law, on the short term APR isn't completely accurate because the interest isn't being compounded over the full year. Some companies, like Sunny, remove the difficulty of figuring this out by explaining exactly how much you'll pay in interest for hypothetical loans using an adjustable calculator.

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Choosing the right short-term loan

There are many different lending companies in the UK that offer short-term loans. Choosing the one that works for you goes beyond comparing APRs - you also need to think on all the smaller details. Will they allow you to change payment schedule as you go? Will they charge fees upfront, or late fees? Are their interest rates fixed, or do they have a method for you to gradually lower your rates? Do they offer instalments, or just one lump sum? By taking these questions and more into consideration before you get your short-term loan, you can get the best deal and the loan that works best for your situation.

What makes Sunny short-term loans different?

Sunny loans operate with simplicity, honesty, and transparency. We make everything, including the fine print, easy to understand by giving you all the details you need upfront, before you've made your choice. Below are some important factors about our loans that we encourage you to compare to similar short-term loans:

  • Our loans have no fees, guaranteed.

  • We give you 5 days to change your mind and repay the principal with no fees and no interest. You can do this once per month, no questions asked.

  • Applying is via our easy to follow online application and delivers a decision in minutes.

  • If approved, the cash you borrow is sent to your bank within 15 minutes.

  • Money tips - videos, guidance, quizzes and tools to help improve your money management skills.

  • Sunny's flexible overpayment plan allows you to pay more each month if you wish, meaning you repay earlier and save money in interest.