Please note: High-cost short-term credit is unsuitable for sustained borrowing over long periods and would be expensive as a means of longer-term borrowing.
It can be hard to predict what costs are around the corner. If you’ve been hit with an unexpected cost – for example a big car repair bill – taking out a two-month loan is one way to bridge the gap. Find out about the high costs of this type of loan, and alternative options.
Plenty of lenders offer loans you can repay in two monthly instalments. Normally the instalments are roughly equal, but some lenders in the first month only charge you the interest that has accrued, and then in the second month charge interest plus capital (the amount you borrowed). That can seem handy if you need a little time to get back on your feet – but it will cost you more in interest overall.
Two-month short-term loans are a fast but eye-wateringly expensive way to borrow, with interest rates typically higher than many other forms of credit. Before taking out a short-term loan, consider alternatives such as those outlined by moneyadviceservice.org.uk. If you do opt for a two-month short-term loan, online applications are simple and quick, and if your application is accepted, many providers can have your cash transferred to you in a matter of minutes or hours.
We compare payday/short-term loans from
Is high-cost, short-term borrowing a good idea?
Payday or short-term loans are very expensive and not a good idea for borrowing over longer periods, or for sustained borrowing. They may not solve your money problems.
Before applying for a payday or short-term loan you should always consider other options. Is the expenditure that you’re planning absolutely essential? If possible you should defer your purchases as this will save you money in the long run. If you need the money to pay a bill, it could be worth speaking to your provider to see if you can negotiate a payment plan or defer your payment. Read more about alternatives to taking out a payday loan at moneyadviceservice.org.uk.
What you need to know about 2-month payday loans
A two-month short-term loan is a high-interest form of borrowing, designed to be a temporary helping hand when you’re facing an unforeseen shortfall in cash. Two-month short-term loans are generally paid in two monthly instalments, however some lenders will also provide the option for weekly or fortnightly instalments. Before taking out your loan you should make sure you’re confident you’ll be able to make the agreed repayments – failure to do so will damage your credit score, making it harder to secure credit in the future.
- Small loan amounts. Although some lenders state that they offer short-term loans of up to £1000 or more, don’t expect to be approved for this if you’re a new customer – lenders will want to start small.
- High interest rates. The interest rates typically charged on two-month loans are undoubtedly high. The maximum rate lenders can charge is 0.8% a day, but to put that into perspective, if you borrowed £200 for 2 months at a rate of 0.8% per day, and repaid in equal monthly instalments, the loan would cost you around £75 in interest.
- Regular repayments. Normally you’ll pay back a two-month loan in two equal instalments – the first being one month after taking out the loan, and the second, final payment, two months after taking out the loan. Many lenders offer borrowers the facility to repay fortnightly or even weekly. It is often advisable to align repayments with paydays – so if you get paid weekly, it could be a good idea to request loan repayments to be taken immediately after you’ve been paid each week.
- Early repayment. Although when you sign up to a two-month short-term loan you will agree set repayment dates with your lender, it is usually possible to pay all or part of your loan back early. This is generally a great idea, if you can manage it. By paying off your loan early you could cut down how much you pay in interest. Make sure you check the early-repayment terms set by the lender before taking out your loan.
- Paid back by CPA. Repayments on payday/short-term loans are usually taken via Continuous Payment Authority (CPA), but you can usually opt to pay by direct debit or manually.
- Fees. Although lenders generally don’t charge set-up/arrangement fees, expect to be charged up to £15 for a late repayment (this will also damage your credit rating, and your ability to secure affordable credit in the future).
Benefits and drawbacks
Requirements will vary by lender, but expect to be required to meet the following criteria:
- Be aged 18 or over.
- Be a UK resident.
- Hold a bank account.
- Have an email address and mobile number.
- Have some form of regular income.
What is a Continuous Payment Authority (CPA)?A CPA is a recurring payment in which you give a company permission to withdraw money from your account on a regular basis.
CPA differs from direct debit because they give the company being paid the ability to withdraw money from your account whenever they wish, and to take payments of different amounts without consulting you. Most payday loan companies will use CPA to collect your repayments, however you can cancel this at any point by either consulting with your provider or your bank.
Frequently Asked Questions
More guides on Finder
Monzo review: Is it worth it?
Is Monzo’s app-only current account the right option for you? Read our review to get the low-down on all of the features of the account, its card and the app.
What you need to know about getting a mortgage if you’re buying or refinancing a farm or farmland, including the factors lenders consider when you apply for one.
Mortgage for a hotel
In-depth guide to taking out a commercial mortgage to buy or refinance a hotel. Find out how to get the best rates, factors lenders consider and what you need to apply.
Bridging loan vs commercial mortgage
Find out if a bridging loan or commercial mortgage would suit you if you’re buying or refinancing commercial property and when a bridging loan can be a better option.
10 ways to improve your credit score
The best methods for getting your credit rating in top shape, and boosting your credit score.
Chain break finance
Learn everything you need to know about chain break finance – a type of bridging loan that stops you losing your dream home if the sale of your existing one falls through.
Fix and flip
Read our in-depth guide to fix and flip and how this type of property investment works, including the factors you need to consider, the risks to be aware of and how to finance it.
Commercial bridging loan
Everything you need to know about commercial bridging loans. We look at when they’re useful, how they work and what to be aware of before taking one out.
Hard money loans: Short-term finance in the UK
Learn everything you need to know about hard money loans – also known as bridging loans. Find out how they work, what they can be used for and their benefits and downsides.
100% bridging loans: How to get one
Read our in-depth guide to 100% bridging loans, including how bridging loans work, how to borrow 100% of the property’s value, how to get the best deal and the pros and cons.
Ask an Expert