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What is a short-term personal loan?

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Unexpected expenses like car repairs or medical bills can occur at any time. If you don’t have enough cash on hand to cover these costs, you may want to consider taking out a short-term personal loan. These loans are one way to pay bills in an emergency. In this article we’ll look at the advantages and drawbacks of short-term personal loans, and how you can get one.

Here’s what we’re going to cover:

  • How short-term personal loans work
  • Benefits of short-term personal loans
  • Drawbacks of short-term personal loans
  • How to compare short-term personal loans
  • How to get a short-term personal loan
  • Oportun: Affordable lending options designed with you in mind

Key takeaways

  • A short-term personal loan can help you cover essential or emergency expenses.
  • In many cases you can get approved quickly for a loan of this type, even if you have low or no credit.
  • Comparing lenders and loan options will help you find a short-term personal loan that fits your situation and needs.

How short-term personal loans work

Short-term personal loans are available through many banks, credit unions, and online lenders. You borrow a sum of money and agree to pay it back, with interest and fees, over a period ranging from a few months to a year. This can be a quick solution when unexpected costs arise.

Benefits of short-term personal loans

What are the major benefits of short-term personal loans?

Online application

Many lenders allow you to apply for short-term personal loans online. Typically, the process takes only a few minutes. You’ll be asked to confirm your identity with a government-issued ID and provide some basic information such as your bank account number and proof of employment.

Fast funding

Once you’re approved for a short-term personal loan, you can expect to receive the funds quickly. Some lenders will issue your money within 24 hours; others may take up to a few days.

Easy approval

You may be able to qualify for a short-term personal loan even if you have a low credit score or no credit at all. Taking out a short-term loan is one way to start building your credit.

Various uses

A short-term personal loan can come in handy for a variety of urgent needs such as car repairs, medical bills, and home repairs. You can also use the funds to pay for everyday expenses like groceries and gas.

Drawbacks of short-term personal loans

Although short-term personal loans can help you in an emergency situation, they can also be costly. Some lenders charge interest as high as 400 percent on short-term loans. You may also owe late fees and penalties if you don’t make payments on time.

Before taking out any loan, you need to be sure you can pay back the money you borrow, as well as the fees and interest. Look closely at the conditions of a loan when making your decision.

How to compare short-term personal loans

Here are some things to consider when comparing short-term personal loans.

Loan amount

How much money will you need to cover expenses? You may be able to borrow from a few hundred dollars up to several thousand dollars, depending on the lender.

Repayment term

Repayment periods for short-term personal loans typically range from several months to a year. A shorter term may allow you to pay less in interest, while a longer term could make your individual payments lower.

Annual percentage rate (APR)

A loan’s annual percentage rate (APR) tells you the yearly cost of borrowing money. The lower the APR, the less you’ll spend on a short-term personal loan.

Approval time

If you want to receive funds quickly, look for a lender who offers instant or same-day approvals.

Online reviews

Online reviews are a good way to compare lenders. The more positive reviews a lender has, the better your experience is likely to be.

How to get a short-term personal loan

Follow these simple steps to get a short-term personal loan.

  1. Check your credit score.
    Visit a website like Experian.com that allows you to check your credit score for free. Your bank or credit card issuer may also be able to give you this information. By knowing your credit score, you’ll have a better idea which short-term loans you can qualify for.
  2. Shop around and compare options.
    Explore loan offers from several banks, credit unions, and online lenders to see what’s available. Some lenders allow you to prequalify, which can make it easier to compare costs.
  3. Apply for a loan.
    Once you’ve chosen a short-term personal loan, fill out the application online or in person. You may need to submit documents like pay stubs and a government-issued ID.
  4. Wait for approval.
    Many lenders will let you know the same day whether you’ve been approved for a short-term personal loan. If you’re approved and you agree to the loan, you’ll receive the funds, usually by direct deposit to your bank account.

Oportun: Affordable lending options designed with you in mind

Now that you understand how short-term personal loans work, you may want to explore Oportun’s affordable credit options. Visit our homepage to learn about:

  • Personal loans
  • Credit cards
  • Secured personal loans
  • And more!

Sources

Bankrate. What you need to know about short-term loans

Experian. What is a short-term personal loan?

Forbes. Best short-term personal loans of 2024

NerdWallet. How to pre-qualify for a personal loan

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