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Key takeaways

  • Short term loans are typically easy to qualify for, making them an attractive option for borrowers with less-than-perfect credit.
  • These borrowing options typically come with rapid disbursement of funds, steep APRs, and brief repayment period.
  • Alternatives like paycheck advances, buy now, pay later apps, and personal lines of credit can provide more affordable solutions.

Short term loans can be very helpful when you need to borrow a small amount quickly, but be careful. Many have excessive fees and very short repayment periods. This is especially true for short term cash loans without a credit check.

If you’re facing a shortage of cash and need to borrow money fast, know that you have options. Consider the loans below, but approach with caution and have a repayment plan in place before you borrow.

What to know about short term loans

There is no universal definition of a short term personal loan. Most short term personal loans that we’ll cover have a repayment period of twelve months or less. They are typically unsecured and for small amounts of money, usually under $2,000. The exact loan amounts very by type of loan. Some lenders do offer secured loans. In this case you can use your savings account or car as collateral.

These personal loans are designed to provide quick financial relief, often with lenient requirements, low to no minimum credit score, and a fast approval process. You will likely be required to show proof of employment with sufficient income, a government-issued ID, and a bank account. Most do not require collateral and a few do not conduct a hard credit inquiry. You can usually receive your money within 24 hours.

They sound great when you’re in a pinch for cash, but short term loans are not without their drawbacks. The short repayment period of a few weeks to only twelve months makes them very difficult to pay back. Most lenders charge more in interest and add on fees. Extra fees can include origination fees, prepayment penalties, and late payment fees. An origination fee will be deducted upfront from the loan proceeds upfront. A prepayment penalty is the extra fee charged when you repay the money before the loan term ends. Additionally, the annual percentage rates (APRs) can reach the triple digits. The added costs are to compensate the lenders for the risk they take lending money to borrowers with poor scores.

Before you take out a short term cash loan, look at all your options. Be sure that you can afford to repay what you borrow according to the loan agreement, or else the loan will hurt you more than help you.

When to consider a short term loan

When considering short term personal loans, take a look at:

  • Loan terms
  • Loan amounts
  • Interest rate
  • Additional fees – late fees, prepayment penalty, origination fee
  • Total cost
  • Repayment term

Short term loans can be useful when you need cash fast and have poor credit or no credit history at all.

Short term loans can be a lifeline in an emergency

If you think, “I need a short term loan,” it’s often because an unexpected expense has arisen. Unlike traditional loans, which can take days or weeks to process, short term loans are often approved and funded within 24 hours. The fast timeframe makes them very tempting when facing a financial emergency.

Applying for a short term loan online can further expedite the process. Many online lenders offer personal loans with more lenient requirements and are willing to approve bad credit borrowers. Look for an online lender with quick approval and same day funding.

A good place to start is an online loan marketplace. These platforms let you easily prequalify and compare potential loan offers. Instead of having to complete multiple loan applications, you complete one application and are connected with partner lenders willing to work with you. You then compare loans and select the best one for you.

Best for people with little or no credit history

A lot of short term lenders do not put much emphasis on your credit score, making them a viable option for borrowers with bad credit. Most traditional lenders require a FICO score of 670 or higher, putting personal loans out of reach for those with poor or fair credit scores. Short term personal loans generally have a lower minimum credit score requirement, focusing instead on your income, current debt, and ability to repay the money.

If your lender reports your monthly payments to the three major credit bureaus, then the short term personal loan can help you build credit and establish a positive payment history. All you have to do is make on time payments and keep your credit usage low.

Characteristics of short term loans

The key characteristics of a short term cash loan are:

  • Brief repayment period of a few weeks to twelve months
  • Lenient requirements
  • Easy approval
  • Fast funding
  • High APR (annual percentage rate)

Most short term loan lenders do not have a minimum credit score requirement and many do not conduct a hard credit inquiry. On one hand, this makes them attractive to borrowers with lower scores. On the other hand, the short repayment terms and high APRs make them less desirable.

Types of short term loans

There are several short term loan options, each with different characteristics, fee structures, and repayment terms.

Here’s a detailed look at some of the most common loans and what you should know about each.

Credit card cash advance

A cash advance allows you to withdraw money from an ATM using your credit card. The amount you’re able to withdraw is based on your credit limit. It’s a convenient and fast option since there’s no application process, but it’s costly. Your card issuer will charge a cash advance fee of 3% to 5% of the amount withdrawn, the ATM will likely charge a fee, and interest starts accruing immediately. Not only is there no grace period, but you will be charged a higher APR for cash advances than for regular purchases. Only take out a credit card cash advance if you can pay it back instantly.

Read more about credit cards!

Payday loans

A short term payday loan is one that is typically due on your next payday. They are accessible even to those with poor or fair credit as the lender doesn’t do a hard inquiry and instead relies on your next paycheck. A payday loan is often marketed as a guaranteed short term loan since they’re so easy to get. However, payday loans are notorious for their extremely high interest rates and fees – a 400% APR is not uncommon. When considering ‘Which will charge the highest interest rate on a short term loan?” payday loans are often at the top of the list. They can trap borrowers in a cycle of debt due to their short repayment periods and high costs. It’s crucial to fully understand the various loan terms before taking out a payday loan to avoid financial pitfalls.

payday loan

Pawnshop loan

Pawnshop loans require you to use a valuable item, such as jewelry or electronics, as collateral. The pawnshop will appraise the item and offer you cash based on its value. If you repay the loan and interest within the agreed time, you get your item back. If not, the pawnshop keeps and sells the item. These loans do not require a credit check and can be a quick way to get cash. However, the interest rates and fees can be as high as payday loans, and there’s a risk of losing your valuable item if you cannot repay the loan on time.

Car title loan

Car title loans are another type of short term secured loan for bad credit. Here, you use your vehicle’s title as collateral. To qualify, you must own your car outright. The lender takes the title and gives you a loan equivalent to 25% to 50% of the vehicle’s market value. The problems are the same as with previously discussed loans. You must repay the full loan amount plus interest and fees within 15 to 30 days. Plus, once again, the APR can be around 300%. If you cannot repay the full loan amount by the due date, the lender has the right to repossess your car. This makes these loans a risky option.

Cash advance app

Cash advance apps offer a modern twist on short term lending. These apps provide small advances on your next paycheck, without the high costs associated with payday loans. Most apps work by linking to your checking account, where you receive your direct deposit. The app advances money – $50 to $500 – based on your earnings. Most apps do not conduct a credit check nor do they charge interest, making them more affordable.

They do charge either a subscription fee or ask for an optional tip, and there’s usually a fast funding fee if you need cash instantly. While they are less expensive, it’s essential to manage your cash flow carefully to avoid relying on these advances.

No credit check short term loans

No credit check short term loans include cash advance apps, payday loans, car title loans, and pawnshop loans. The latter two are examples of secured loans for bad credit. Credit card cash advances can also be considered no credit check as since there’s no additional hard inquiry for you to withdraw cash using your credit card.

How to apply for a short term loan

The exact application process varies by lender but the basics are generally the same. Start by deciding on the type of loan you want and how much money you need to borrow. Next, explore different lenders. Consider the APR, repayment terms, eligibility criteria, and customer reviews.

Once you have selected a reputable lender, gather the necessary documents, including proof of income like pay stubs or tax returns, government-issued identification, and bank statements. The specific requirements can vary. Submit your application along with the required documents. Many lenders offer instant or same-day approval. Be sure to read and understand the loan agreement before accepting the terms to avoid any surprises later on. Once you sign for the loan, most lenders will send you the funds via direct deposit.

Tips to compare short term personal loans

When comparing short term personal loans, consider these key factors to find the best option for your needs:

  1. Interest Rates: Compare the APR across different lenders to understand the total cost of the loan. Lower rates mean less interest paid over time.
  2. Fees: Look out for hidden fees. An origination fee, prepayment penalty, or late fee are quite common. These can significantly impact the overall cost of the loan.
  3. Repayment Terms: Evaluate the repayment schedule. Flexible terms can help you manage monthly payments better without straining your finances.
  4. Monthly Payment: Consider how much you can afford to pay each month and look a loan whose monthly payment fits your budget. Generally, higher monthly payments means lower overall cost.
  5. Lender Reputation: Check customer reviews and ratings to ensure the lender is reputable and reliable. A lender with positive feedback is more likely to provide a smooth borrowing experience.
  6. Eligibility Requirements: Ensure you meet the lender’s eligibility criteria, which can include a minimum credit score, income level, and employment status.
  7. Loan Amounts: Compare the maximum and minimum loan amounts offered by different lenders to ensure they can meet your specific needs.

Why you should avoid short term loans

While short term loans can offer quick access to cash in an emergency, there are significant reasons to be cautious when applying for a short term loan.

Interest rates and fees

Short term loan companies often charge notoriously high interest rates and fees. A lot of their APRs are in the triple digits, making them much more expensive than a traditional personal loan. For instance, payday lenders typically charge a fee of $10 or $30 for every $100 borrowed. If you borrow $500, that means you have to pay back $650 within 14 days. This can be very difficult to do.

Comparing short term vs long term loan options reveals that long-term loans generally charge much less in interest. Interest rates on installment loans range from only 8% to 30%. True, those with higher credit scores get lower interest rates, but a 30% APR is still a lot better than a 400% APR.

Many lenders offer loans with tacked on fees. Origination fees are typically taken out upfront and can cost anywhere from 1% to 10% of the total loan amount.

Credit score penalties

Short term loans are difficult to repay on time. If you fail to repay, your credit score can suffer. Depending on the type of loan, the lender may report a missed or late payment to the credit bureaus, causing your score to drop. They could also sell your account to a collection agency. Having an account in default will drag your score down and stay on your credit report for up to seven years.

A lower credit score can affect your ability to obtain future credit, secure favorable interest rates, or even get approved for certain jobs or rental agreements.

Debt cycle

A lot of borrowers are unable to repay the money within the allotted time frame and find themselves taking out a new loan to cover the old one. The Consumer Financial Protection Bureau (CFPB) found that four out of five payday loans are rolled over or renewed within 14 days of the initial loan. The big issue here is that the fees add up fast. Taking out new loans or rolling over old ones leads to a cycle of debt that can quickly spiral out of control.

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Alternatives to short term loans

While short term loans can provide quick cash, they come with high costs and risks. Fortunately, there are several alternatives to consider.

Buy now, pay later apps

Buy now, pay later (BNPL) apps allow you to make purchases and pay for them in installments over time, often without interest (if you adhere to the payment schedule.) BNPL apps make it easy to manage larger expenses without needing to buy a short term loan. Always read the terms and conditions carefully, as missed payments can result in late fees and impact your credit score.

Paycheck advance

Ask your employer if they offer paycheck advances. A paycheck advance lets you access a portion of your earnings before payday. Your employer is not allowed to profit off an advance so there are no interest charges and little to no fees. They may charge a fee to cover the extra accounting services but no origination fee. The lower charges make this a more affordable option. Most employers will deduct the advanced amount from your next direct deposit. If your employer does not offer this service, there are also third-party apps that facilitate paycheck advances.

Credit card

Using a credit card can be a more manageable, cheaper, and flexible alternative. While credit cards do charge interest, the rates are significantly lower than what most personal loan lenders charge. Additionally, most credit cards offer a grace period during which you can pay off the balance without incurring interest. This can be particularly beneficial if you need short term financing and are confident you can repay the money quickly. While safer than a short term personal loan, credit cards aren’t without their dangers and should be used responsibly.

Ask friends and family

If you’re in a financial bind, ask friends or family if you can borrow money. If you go this route, it’s important to put everything in writing and state exactly how and when the money will be repaid. Clear loan terms can help to avoid any strains in your relationship.

Personal line of credit

A personal line of credit is another alternative to consider. Unlike a personal loan, a line of credit provides access to a set amount of money you can draw from as needed. You only pay interest on the amount you borrow; once you repay it, those funds become available again. This can provide more flexibility than a lump-sum loan and typically comes with a lower APR than payday loans or cash advances. Banks and credit unions often offer personal lines of credit, as do some bad credit lenders. It’s worth checking with your financial institution to see if it’s an option.

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Frequently asked questions

A short term loan is a type of loan that is repaid within a few weeks to a year. Most short term loans are for small amounts but have high costs. They are designed to provide quick access to cash for urgent financial needs. Common examples include payday loans, credit card cash advances, and small personal loans with brief repayment terms.

To borrow $500 quickly, consider options such as payday loans, cash advance apps, or credit card cash advances. Additionally, you can ask friends or family for a loan or explore paycheck advance services offered by your employer. Each option provides fast access to cash, but be sure to review the loan terms and potential fees carefully. It’s not worth taking out a personal loan you cannot afford to repay.

Yes, you can get a three month loan from various lenders, including online loan providers, credit unions, and banks. A three month loan is considered a short term loan. Carefully review the interest and fees to make sure that you can afford them. Try prequalifying with at least three lenders and comparing options to find the most affordable loan that meets your needs.

The best loan for short term needs depends on your financial situation and credit history. Personal loans from credit unions are generally going to have the most favorable ARPs. This is especially true if you have a good credit score. If your score is poor, look into paycheck advances or cash advance apps. These are better options due to their lower interest rates and fees compared to payday loans. Always compare loan terms and consider repayment capabilities before borrowing money.

Bottom line

A short term cash loan can be convenient and get you out of a financial bind, but it comes with risks. Most short term loans have sky-high interest charges and tacked on fees that traditional personal loans lack. Origination fees and prepayment fees are top concerns. The high costs and brief repayment window make them risky and lead to a cycle of borrowing. 

Before choose this borrowing option, research alternatives and look for reputable lenders. Understand the loan terms, and fees, and make sure you can afford to repay the money as agreed.

About the author

Rachel Alulis

Rachel Alulis has been the lead editor for Moneyfor’s credit cards team since 2015 and for the financial rewards team since 2023. Before joining Moneyfor, Rachel worked at USA Today and the Des Moines Register. She then established a successful freelance writing and editing business specializing in personal finance. Rachel holds a bachelor’s degree in journalism and an MBA.