He also has experience of promotion to the Premier League after playing on loan at Blackpool last season.
"He's lively and can pass the ball," United assistant manager Glynn Snodin told BBC Radio Leeds.
"We needed to get a midfield player in, in case anything happens to the other three that have been playing in there.
"He's had a few games at Aston Villa and at Scotland, but he wants the ball, wants to play, has legs and has energy and he loves the game as well."
Bannan goes straight into the squad for Leeds' trip to Preston on Tuesday.
Villa will retain a recall clause on their player which can be used after 28 days.
Source: BBC Sport
Source: BBC Sport