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The Best Short-Term Personal Loans
Sometimes you need a little extra cash for a shorter period of time. In these unique situations, it can be overly-expensive and downright silly to use a loan or borrowing option designed for the long term. Luckily, short term loan options exist and can help you meet your financial needs fast. Additionally, short term lending protects you from the need to pay back a loan over several years or pay way more interest and fees than you need to.
Check out some of the best short term loans currently available as rated and reviewed by our team through the SimpleScore process, which compares APRs, customer satisfaction, support, loan amounts and fees.
The best short-term loans of 2020
- USAA: Best for Small Loans
- American Express:Best for Larger Loans
- PNC Bank: Best for Favorable Options
- RISE Credit: Best for Bad Credit
- U.S. Bank: Best for Lowest Rates
Best short-term loans at a glance
|American Express||5.91%–19.98%||12–36 months||$3,500–$25,000||4.25/5|
|PNC Bank||Varies by zipcode||6–60 months||$1,000–$35,000||4/5|
|RISE Credit||50.00%–299.00%||4–26 months||$300–$5,000||2.5/5|
|U.S. Bank||Starting at 5.24%||12–60 months||$1,000–$25,000||3.6/5|
Rates accurate as of November, 2020 and exclude autopay discounts.
What is a short-term loan?
Loans for short terms are quite similar to any other loan out there, except the products are specifically designed to be repaid much faster. Generally, any loan with repayment terms of 12 months or less is considered a short-term loan. Much like other personal loans, you can get these short-term lending options through a bank, credit union, online lender or any other financial institution in the lending business.
[ Next: Is a Personal Loan My Best Option? ]
How short-term loans work
Short-term loans work much the same as any other type of loan out there. The lender gives you a sum of money upfront. In return for quick access to the money you need, you agree to pay that money back plus interest costs and fees. Generally, these payments are spread out as monthly payments, but the payments can sometimes be weekly or bi-weekly in the case of very short-term loans.
Additional upfront fees
Sometimes you may have to pay slightly higher fees upfront on shorter-term loans. This is because without prepayment penalties, the lenders might not stand to make much if people only borrow the money for a very short period of time. As lenders do have some fixed costs, you may see this reflected in the upfront fee structure.
Pros and cons of a short-term loan
The pros of a short-term loan option are plentiful. Most importantly, the loan is designed for a shorter term. This means you’re not going to pay interest for longer than you ideally need to. Additionally, shorter-term loans are available for smaller amounts of money, which is nice for people who are looking to meet a quick and smaller financial need.
The drawbacks to loans for shorter terms are that you generally see smaller maximum loan amounts, and you may see higher upfront fees to help cover the lender’s fixed costs. In addition, you may see some shorter-term loans that don’t allow prepayment, which is another way that the lenders may work to protect their profits.
Emergency short-term loans
Sometimes life throws curveballs you just don’t see coming. And sometimes, these curveballs can leave you with a need for a short-term emergency loan. Examples of these situations might be unexpected medical bills, damage to your property not covered by insurance, a car breaking down not under warranty or even a major appliance finally giving out. All of these situations are not ideal, but they can’t be ignored because of the major implications they can have.
It’s imperative in these time-sensitive situations that you remain calm and don’t do anything too hastily without thinking it through. It can be tempting to jump at the first offer you have for a loan, but you need to make sure it’s the right choice. Making the wrong choice could help you now, but it could set you up for a lot of troubles in the future.
How a short-term loan affects your credit score
Short-term loans will have an effect on your credit score, which is important, especially if you have other major financial purchases coming up in the future. First, anytime you take on more debt, it can lower your credit score. The more debt you have outstanding, the riskier you look to lenders.
But here’s the good news. As you start to make on-time payments on your loan, that starts to demonstrate good borrowing behavior. The more on-time payments you make, the higher your score will rise. Shorter-term loans help to add to the mix of your loans and give you an opportunity to showcase good borrowing habits to the reporting bureaus.
Short-term lending for bad credit
If you have bad credit, your less-than-stellar credit score may create some problems when trying to borrow money. First, here’s the good news. If you have bad credit, you can still take advantage of short-term lending. Many lenders specialize in giving people second chances and are willing to offer you a loan.
On the other side, though, the money is going to be more expensive. Because the cost of borrowing is a reflection of risk versus reward, the lender is going to need to get more reward for the added risk it is taking. This usually means higher interest rates and more fees. Additionally, you may have to shop around quite a bit to find the right lender that’s willing to work with you.
The best news? If you are able to get a loan, it’s an opportunity to start building your credit back up. The next time you need to borrow money, you’ll have access to better rates and more favorable repayment terms.
How to choose the best short-term loan for you
- Determine your needs. Before you can start shopping for the best short-term loan for you, you have to know what you need and how much you need. This is also a great time to determine whether the purpose of the loan is for a want or a need.
- Shop the factors that matter. Make sure you don’t just look at one factor, like how much you can get or what the interest rate is when choosing. You want to take a holistic approach and look at the whole picture before deciding. This includes looking at interest rates, eligibility requirements, repayment terms, prepayment penalties, fees and anything else that might make one option better for you than the other.
- Check your rates. For each lender on your shortlist, check your rate. This is usually a soft credit check and won’t affect your credit. Then, you can compare the rates and terms that each lender offers.
- Compare your options and make a decision. Once you know what you want and what to look at, it’s time to compare options. Find the lenders willing to work with. From there, see which offers you the best opportunity. When you find it, go ahead and fill out the final application and get your approval.
[ Next: How Personal Loans Work ]
We welcome your feedback on this article and would love to hear about your experience with the personal loans we recommend. Contact us at firstname.lastname@example.org with comments or questions.