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Short-Term Personal Loans: Defined and Explained

The Short Version

  • You pay back short-term personal loans in – you guessed it – a short amount of time
  • Short-term personal loans are typically unsecured, which means you don’t need to provide collateral (think: offering up a house, car, boat, etc.) to get a loan
  • Short-term personal loans typically have high interest rates and penalty fees that pile up if the loan isn't paid on time


If money is tight or you need to borrow money fast to cover an emergency, a short-term personal loan may be a money-savvy lifeline. These loans allow you to borrow money quickly and repay them quickly.

To make the best decision for your finances, weigh your options before you pick a short-term loan. Be realistic about how much you can borrow – and how fast you can pay it back. These factors should help guide your decision.

Let’s dive into how short-term loans work, eligibility requirements, pros and cons and more.

What a Short-Term Personal Loan Is

Short-term personal loans are different from traditional, longer-term loans because of their shorter repayment periods. You pay back short-term personal loans in – you guessed it – a short amount of time, anywhere from a few weeks to a year. With standard personal loans, the typical repayment period is anywhere from 36 months to a few years.

And repayment isn’t the only thing that happens quickly. You may be approved for a short-term personal loan in as little as an hour and receive the funds in a day.

Personal loans come in two flavors: unsecured and secured loans. Short-term personal loans are typically unsecured, which means you don’t need to provide collateral (think: offering up a house, car, boat, etc.) to get a loan. Because there is no collateral securing the loan, there is no asset for your lender to seize if you default on the loan.

As long as you meet the loan’s requirements, all you need to provide is your signature.

While short-term loans give you access to cash fast, that speed comes at a price. Short-term personal loans typically have high interest rates and penalty fees that pile up if the loan isn’t paid on time – though factors like your credit history, credit score and loan amount will affect your loan terms, too.

Types of Short-Term Personal Loans

In the middle of an emergency, your focus may be on how much money you can get and how much your monthly payments will be. But you should also focus on choosing a short-term loan that suits your needs and budget.

These loans fall under the short-term personal loan umbrella:

  • Installment loans: Installment loans provide money upfront that you pay back with fixed monthly payments over the loan’s repayment term (aka length). (FYI: Repayment terms will vary by lender.)
  • Cash advances: A cash advance is money you borrow against your credit card’s credit limit. You can get a cash advance through your bank or at an ATM.
  • Payday loans: Payday loans are smaller, usually around $500 or less, and the idea is that you’ll pay the entire loan back by the time your next paycheck rolls around. Payday loans are convenient but have sky-high interest rates and fees. They can be dangerous. If you can’t pay your loan back in time, you’ll risk getting trapped in a hard-to-escape debt cycle.

Payday loans are typically considered predatory because their fees are equivalent to an annual percentage rate (APR) that’s close to 400%.[1] If you can’t pay back the loan on time, you’ll be stuck paying back substantially more than you borrowed.

What are the short-term personal loan interest rates?

Short-term personal loan interest rates may vary depending on your credit history, the type of loan and the lender you choose. So it’s essential to check your finances and credit before applying.

When you compare loans, look at the APR to help you better understand what you’ll be paying over the life of the loan. APR includes your interest rate and any other fees a lender adds to a loan. When you compare APR rates, you’re comparing the total cost of a loan.

Where To Get a Short-Term Personal Loan

You’re probably wondering where you can get a short-term personal loan. The good news is you have a few avenues to try, including:

  • Online lenders: Looking online for short-term loans puts multiple options at your fingertips. Use reputable websites that compare loans and their terms. (It’s much easier than switching between tabs.) You can also get prequalified by a lender. And don’t worry about it. A soft pull on your credit report won’t hurt your credit.
  • Credit unions: If you have an account at a credit union, check out their short-term loan offers. Your credit union may offer more relaxed loan requirements than a traditional bank, and their interest rates and loan terms may be more favorable. Your credit union will use more than your credit score to approve you for a loan. They’ll also look at your member history, which may boost your chances of being approved.
  • Banks: If you have a checking account with a bank, see what short-term loans they offer. You may need a higher credit score to qualify for a bank loan, but it may be a good option.

No matter where you decide to get a loan, keep your eye on the prize. Make a decision that doesn’t hurt your finances or damage your credit. And to do that, you’ll need to compare lender interest rates and loan terms.

Benefits and Drawbacks of Short-Term Personal Loans

Short-term loans can be a temporary saving grace, but you should consider their pros and cons before agreeing to a loan offer.

PROS of Short-Term Personal Loans👍

Fast money

If you need money fast, short-term loans can help. You may receive the loan in a day (depending on the lender and loan type).

More accessible

Short-term loans tend to be easier to snag than other loans. Don’t get us wrong, a lender will review your credit history and credit score, but having bad credit won’t necessarily get your loan application denied.

No Collateral

Most short-term loans are unsecured. You don’t need to offer up a valuable asset, like a house or car, to secure the loan.

Fixed monthly payments

Short-term personal loans typically have fixed payments. You can count on making the same payment every month over the life of the loan.

CONS of Short-Term Personal Loans👎

Penalty fees

Short-term loans are usually repaid in weeks or a few months, which may add stress to a tight budget. Prepayment penalties, late fees, origination fees, etc. could also do more damage to your finances. Missed payments or late payments can tack on costly fees or cause you to default on the loan.

Higher interest rates

Short-term personal loans usually have high interest rates because the loans are unsecured. The rates you’re offered may climb even higher if you have poor credit or opt for a payday loan.

Credit impact

While short-term personal loans typically help you build credit if you opt for an installment loan, considering how short these loans are, an installment loan may not have the impact you want. And if you run into any trouble paying back your loan, you may harm your credit score rather than help it. Use them for emergencies, not as part of a credit building strategy.

How To Get a Short-Term Personal Loan

How challenging it is to get approved for a loan will depend largely on the lender, the type of loan you want and your finances. But here are a few things to know so you’re well on your way:

  • Check your credit scores and free credit reports to see where your credit stands.
  • Research lending options that work best for your financial situation and start to narrow your choices.
  • Collect paperwork and information to apply for a short-term personal loan, such as bank account information, bank statements, your Social Security number, pay stubs, personal identification, etc.
  • Get prequalified by one or more lenders and compare the loan offers.
  • Fill out a loan application.
  • After you’re approved, read through the loan offer carefully, making sure you understand the loan’s terms.
  • Sign the loan agreement.
  • Wait for the money to hit your bank account – usually in as little as 24 hours.

Sometimes You Need a Little Help From Lenders

Financially sticky situations sometimes call for short-term personal loans. Make sure your loan is a financial benefit – not a financial burden – by shopping for lenders and comparing loan offers to avoid getting financially stuck.

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  1. Consumer Financial Protection Bureau. “What Is a Payday Loan?” Retrieved August 2022 from

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